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Stocks stabilize, dollar dips, and metals shine amid economic anticipation

April 9, 2024

On a day marked by cautious trading, stock markets ended with marginal changes as investors weighed the impact of rising Treasury yields against the backdrop of impending U.S. inflation data, with Tesla’s stock standing out after an upbeat announcement from CEO Elon Musk. In currency markets, the U.S. Dollar resumed its downward trajectory, influenced by anticipation ahead of key economic reports, while the EUR/USD and GBP/USD pairs gained ground. Commodities saw mixed fortunes, as crude oil prices dipped due to easing geopolitical concerns, whereas gold and silver prices soared, reaching new highs amidst the dollar’s weakness and investors’ hunt for safe-haven assets. This confluence of events reflects a global financial landscape bracing for significant economic indicators and central bank actions that could reshape market dynamics in the near term.

Stock market updates

Stocks closed with minimal changes on Monday as an increase in Treasury yields held investors back from making significant moves, awaiting crucial U.S. inflation data. The Dow Jones Industrial Average slightly fell by 11.24 points or 0.03% to settle at 38,892.80, while the S&P 500 dipped by 0.04%, ending the day at 5,202.39. On the other hand, the Nasdaq Composite saw a slight increase of 0.03%, closing at 16,253.96. Tesla’s shares surged 4.9% following CEO Elon Musk’s announcement of a robotaxi reveal in early August, highlighting a noteworthy move in the market amidst a general state of anticipation.

The increase in Treasury yields acted as a barrier to significant market gains, with the benchmark 10-year Treasury note yield climbing about 4 basis points to 4.42%. Investors are keenly awaiting the March consumer and producer price indexes due later this week to gauge the effectiveness of the Federal Reserve’s efforts to combat inflation. The anticipated CPI figure, expected to rise by 0.3% last month, is particularly under scrutiny for indications on when the Fed might start reducing interest rates, stirring speculations and strategies among market participants.

Despite the subdued market movements, optimism remains tied to the broader economic outlook, especially after a stronger-than-expected jobs report last Friday. The report spurred hopes for sustained corporate earnings growth amidst a robust economy, despite the potential for enduring higher interest rates. This hope comes after both the Dow and S&P 500 experienced notable weekly losses, marking a period of cautious investor sentiment as they navigate through the implications of economic data and Federal Reserve policies on the market’s future direction.

Currency market updates

The U.S. Dollar resumed its downtrend at the start of the week amid rising anticipation for several key U.S. economic reports due later in the week, including the NFIB Business Optimism Index and the RCM/TIPP Economic Optimism Index, among others. The EUR/USD pair showed strength, rebounding from Friday’s dip to touch the 1.0860 area again. Similarly, the GBP/USD pair advanced to two-day highs near 1.2660, buoyed by risk sentiment and ahead of the BRC Retail Sales Monitor report. Meanwhile, the USD/JPY pair saw a modest increase but struggled to breach the significant 152.00 level, with market participants also eyeing upcoming consumer confidence and machine tool orders data from Japan.

The Australian Dollar made gains against the weakening U.S. Dollar, pushing past the 0.6600 mark and reaching two-day highs as traders anticipated domestic consumer confidence indexes. This movement in currency pairs comes amid a backdrop of cautious trading ahead of substantial economic indicators and central bank communications, including a scheduled speech by Minneapolis Fed President N. Kashkari, all of which could significantly influence market sentiment and currency valuations.

In commodities, crude oil prices faced another day of declines amid diminished geopolitical tensions, affecting market dynamics. Conversely, gold prices maintained their upward trajectory, reaching new all-time highs past $2,350, while silver prices also surged, surpassing the $28.00 per ounce mark for the first time since mid-June 2021. These movements in precious metals and energy commodities reflect the broader market’s response to fluctuating economic indicators, geopolitical developments, and the overarching trend of dollar weakness, all contributing to the complex interplay of forces shaping the currency markets.

Picks of the day analysis
EUR/USD (4 Hours)

EUR/USD rises amidst diverging central bank strategies and economic outlooks

The EUR/USD pair experienced a notable increase, touching the 1.0860 mark, driven by a downturn in the US Dollar alongside positive movements in both US and German yields, all against a backdrop of unchanged monetary policies. As both the Federal Reserve (Fed) and the European Central Bank (ECB) gear up for expected easing cycles starting in June, differences in the pace of interest rate cuts may lead to divergent central bank strategies. Despite a potential initial alignment in easing measures, the medium-term outlook suggests a stronger Dollar, influenced by more robust fundamentals in the US compared to the eurozone. This scenario positions the EUR/USD for a possible downward adjustment, initially aiming for its year-to-date low around 1.0700, with further potential declines beneath the 1.0500 level.

Chart EUR/USD by TradingView

On Monday, the EUR/USD moved higher trying to reach the upper band of the Bollinger Bands. Currently, the price is moving in the middle between the middle and upper band, suggesting a potential slight downward movement to reach the middle band before going back higher. Notably, the Relative Strength Index (RSI) maintains its position at 57, signaling a neutral but bullish outlook for this currency pair.

Resistance: 1.0858, 1.0911

Support: 1.0785, 1.0723