General Market Analysis – 10/09/24

US Stocks Rally Ahead of Inflation Data – Dow up 1.2%

US stock indices rebounded in trading yesterday as investors turned their attention to upcoming inflation data. The Dow led the surge, closing the session up 1.2%. It was closely followed by the S&P 500 and Nasdaq, both ending the day with a 1.16% gain. The dollar also had a strong showing, advancing 0.4% on the index, as FX traders began pricing in a smaller rate cut from the Fed next week. Treasury yields saw a mixed performance in choppy markets, with the 2-year yield rising by 2.1 basis points to close at 3.669%, while the 10-year yield slipped by 0.9 basis points to settle at 3.699%. Oil prices pushed higher as Tropical Storm Francine moved across the Gulf of Mexico, lifting Brent crude by 1.10% to $71.84, and WTI by 1.54% to $68.71 per barrel. Meanwhile, gold traded within familiar ranges, gaining 0.4% to close at $2,505 by the end of the New York session.

Dollar Poised for Further Gains with Fed in Focus

The dollar strengthened significantly in yesterday’s trading session, with most major currencies now reverting to mid-range levels after last week’s volatility, driven by heightened expectations of a 50-basis point Fed rate cut. While treasury yields remain subdued, FX traders have been buying back the dollar, which had seen a sharp decline in recent weeks. The safe-haven appeal of the greenback is gaining traction among market participants, as fears grow that the US economy may face contraction. However, the general sentiment suggests the Fed is unlikely to make drastic policy moves in response. Should tomorrow’s inflation data align with market expectations, traders anticipate further unwinding of the dollar’s recent downside.

Key Data and Central Bankers in the Spotlight Today

After a quiet start to the week, today’s macroeconomic event calendar heats up, with key data releases from the UK and updates from major central bankers. The Asian session is expected to be relatively uneventful, but attention will turn to the UK once the European trading day begins, with crucial employment figures set to be released. The market expects the Claimant Count to show an increase of 95,000, with the unemployment rate dropping to 4.1%. Later in the day, Bank of Canada Governor Tiff Macklem will speak in London, followed by remarks from FOMC members Michael Barr and Michelle Bowman during the New York session.

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