An overview of the global market

Dollar Strengthens Amid Inflation Surprises and Anticipation of Central Bank Moves

The U.S. dollar traded in a tight range on Thursday, as market players tried to gauge when the Federal Reserve will likely begin cutting interest rates as Fed officials weighed in on Tuesday's inflation data. Also, the dollar is waiting for retail sales data and some other economic data that may impact it. Chicago Fed President Austan Goolsbee said on Wednesday the Fed's path will still be on track even if price increases run a bit hotter than expected in coming months, and the central bank should be wary of waiting too long before it cuts interest rates. Fed Vice Chair for Supervision Michael Barr said the Fed remained confident, but the January CPI numbers show the United States' path back to 2% inflation may be a bumpy one.
The euro is reflecting stagnant economic growth in the latest quarter, influenced by higher interest rates and a slowdown in demand. Yesterday's GDP data revealed that the European economy experienced no growth, meeting expectations for the fourth quarter. As markets await ECB President Lagarde's testimony before the European Parliament's Committee on Economic and Monetary Affairs, the ECB, grappling with a slowdown in inflation to 3% and economic contraction, may consider a cut earlier than expected.
The UK Office for National Statistics reported that the economy unexpectedly contracted by 0.3% in the final three months of 2023. This follows a 0.1% drop in GDP during the July-September period, meaning that the economy entered a technical recession. Against the backdrop of Wednesday's softer UK consumer inflation figures, the latest data reaffirms market bets that the Bank of England (BoE) will start cutting interest rates soon and continues to undermine the British Pound (GBP).
The Japanese Yen (JPY), on the other hand, draws support from speculations about a potential intervention by authorities to stem the recent decline in the domestic currency. Provisional data released this Thursday showed that Japan's GDP contracted by 0.4% during the October-December period, missing market expectations for a 1.4% growth by a huge margin. This comes on top of the previous quarter's slump of 3.3%, confirming a technical recession and raising uncertainty about the likely timing of when the BoJ will exit the negative interest rates policy.
Gold prices remain below $2,000. The US inflation data suggest the Federal Reserve will be cautious about rate cuts in 2024. Geopolitical tension in the Middle East could support gold. Traders await US Retail Sales data and speeches from Fed officials for further direction.
Oil prices fell on Thursday after a jump in U.S. crude inventories that exceeded expectations, raising concerns about demand in the world's largest economy and top oil consuming nation. The Energy Information Administration (EIA) said U.S. crude inventories jumped by 12 million barrels to 439.5 million barrels in the week to February 9, surpassing analysts' expectations in a Reuters poll for a 2.6 million-barrel rise.
Global Economic Update: Navigating Currency Pressures, Rate Speculations, and Commodity Market Dynamics

The dollar remains under pressure today, influenced by expectations of a rate cut by the Fed, as this week's FOMC meeting is closely watched for clearer indications on the timing of the initiation of rate cuts, with market expectations leaning towards June. Additionally, PMI data will serve as a key indicator of the health of economic developments, amid concerns that the current economic resilience might shift due to the continuous impact of high rates on the economic condition, as evidenced by last week's retail sales data. Inflation data last week was unexpectedly high, as indicated by CPI and PPI figures. Today's holiday will lead to reduced market volume.
The Bank of England (BoE) is anticipated to keep interest rates at their current levels for an extended period. Persistent price pressures in the UK economy, driven by stubborn service inflation, steady labor demand, and robust household spending, are expected to enable BoE policymakers to sustain a hawkish stance for a longer duration. The unexpectedly positive UK Retail Sales data from last week suggests that the impact of higher BoE interest rates on consumer spending is diminishing, indicating that the UK economy may emerge from the technical recession sooner than anticipated.
The yen has been fluctuating around the 150 level in recent days, prompting official comments on currency movements and keeping markets on high alert for possible intervention by Japanese authorities to stabilize the faltering currency. Ministry of Finance officials have "taken the first step onto the intervention escalation ladder" by warning against rapid movements and threatening action, even outside of their timezone.
Japan's low yields have made the yen an easy target for short-sellers and funding trades, with the widening interest rate gap between Japan and the United States contributing to the yen's persistent weakness.
Regarding gold, recent geopolitical developments, expected to prolong tensions, have led to a resurgence in safe-haven flows towards the yellow metal. The upcoming FOMC minutes are eagerly awaited for more insights into the Fed's policy outlook, with any hawkish stance from policymakers likely to reignite concerns that rates might be kept high for an extended period, potentially impacting gold prices negatively.
Oil prices are trading lower due to concerns over sluggish demand and diminishing hopes for imminent interest-rate cuts, following reports of higher producer prices in the U.S. Data from the U.S. Labor Department indicated that January's wholesale prices rose more than expected, signaling persistent inflation just days after the closely monitored consumer price index also exceeded forecasts. The prospect of prolonged high interest rates, coupled with an IEA report highlighting a significant slowdown in oil demand, is dampening market sentiment, despite escalating tensions in the Middle East, including Red Sea attacks and Israel's military actions in Gaza.
Global Markets Navigate Economic Indicators and Policy Expectations

The Dollar Index (DXY) remains neutral today, following a pause in trading by American investors yesterday in observance of US Presidents' Day, and as markets absorbed last Friday's Producer Price Index (PPI) data. With both headline and core PPI increasing, the US Dollar Index could experience further gains as the high inflation figures from January might prompt the Federal Reserve to maintain a cautious approach. Attention this week shifts to the Federal Open Market Committee (FOMC) minutes, alongside upcoming speeches from several Federal Reserve officials.
European Consumer Confidence for February is anticipated to improve to -15.6 from -16.1. Meanwhile, the Eurozone Composite PMI for February is expected to rise to 48.5 from 47.0, remaining in contraction territory (below 50.0) for the ninth consecutive month. This upcoming data will provide further insight into the economic health of the region.
Bank of England (BoE) Governor Andrew Bailey and other policymakers are scheduled to testify before the UK Parliament, offering inflation and interest rates guidance. Investors anticipate a continued hawkish stance from Bailey and his colleagues, given the ongoing challenges in achieving price stability sustainably. Robust wage growth, persistent inflation in the service sector, and strong household spending suggest that the BoE will wait and see before considering rate cuts, as inflation could remain high. Hawkish guidance from BoE policymakers could enhance the appeal of the Pound Sterling.
The yuan stabilized after initially dropping to its weakest level in three months early on Tuesday, following China's larger-than-expected reduction in a benchmark mortgage reference rate aimed at revitalizing the property market. This rate cut complements a series of measures introduced by Beijing over the past year to support the property sector, a critical component of China's GDP.
Gold prices are advancing in anticipation of the Fed minutes set to be released on Wednesday. The precious metal has consistently stayed above the $2,000 an ounce threshold this week, as investors seek indications of the future direction of US interest rates.
Oil prices are dipping due to concerns that a weakening demand outlook may outweigh fears of supply disruptions stemming from increasing tensions in the Middle East. Recent Houthi attacks in the Red Sea have impacted shipping, thereby supporting prices. However, demand concerns linger after last week's International Energy Agency (IEA) report and adjustments in US rate cut expectations, with the market looking for guidance from Wednesday's Fed minutes.
Nvidia's Q4 Earnings Surge on AI and Data Center Growth Leading US Market Rally

  • Record-Breaking Performance: Nvidia's revenue soared to $22.1 billion, a 265% increase year-over-year, driven by its data center business which grew over 400%, highlighting the company's dominance in AI and accelerated computing.
  • Market and Future Outlook: The company's stock rose approximately 16% following the earnings report, with Nvidia on the brink of a $2 trillion market valuation, supported by strong future sales projections and continued demand for its AI technologies despite regulatory challenges.

Nvidia Keeps Breaking Records

Nvidia's latest Q4 earnings report has sent ripples through the market, showcasing a financial performance that has exceeded analysts' expectations and underscored the company's dominance in the AI and data center sectors. With a reported revenue of $22.1 billion, Nvidia has not only beaten the forecasted $20.55 billion but also marked a year-over-year increase of 265%. The earnings per share (EPS) stood at a robust $4.93, surpassing the predicted $4.64, reflecting the company's strong profitability and operational efficiency. These surprising results boosted market sentiment and led the US major indices to close at new historical highs after the stock became the most watched and important stock on the planet lately.
The surge in Nvidia's revenue can be largely attributed to its data center business, which saw a monumental increase of over 400%, amounting to $18.4 billion. This growth has been driven by the widespread adoption of Nvidia's Hopper GPU computing platform and InfiniBand networking solutions, which are integral to AI training and inference applications. Nvidia's CEO, Jensen Huang, has highlighted the company's pivotal role in the AI revolution, stating that "Accelerated computing and generative AI have hit the tipping point," a sentiment that resonates with the global demand for AI capabilities.
Nvidia's Earnings Reflect Positively on Market Share
The market's response to Nvidia's earnings was overwhelmingly positive, with the company's stock price climbing approximately 16% leading gains in both the S&P 500 and Nasdaq 100. This investor confidence is bolstered by Nvidia's forward-looking projections, which estimate sales to reach around $24.0 billion in the upcoming quarter. Nvidia is position to reach a $2 trillion market valuation for the first time, further bolstered by a record $277 billion one-day increase in market capitalization. This optimistic outlook is particularly noteworthy given the supply constraints faced by the company's next-generation B100 chip, which is already in high demand.
Industry analysts have attributed Nvidia's strong performance to the soaring demand for AI across various tech sectors. Nvidia's RTX chips have become a cornerstone for generative AI, gaining popularity among gamers and creators alike. The company's software and services offerings have also made 'great progress,' achieving an annualized revenue run rate of $1 billion. Nvidia's AI enterprise system, which is likened to 'an operating system for artificial intelligence,' is set to be monetized per GPU, further expanding the company's revenue potential.
Dollar Strengthens with Key Economic Data, Central Bank Views, and Commodity Market Outlook

The dollar strengthened on Monday, as investors anticipated a week full of significant economic data that could offer insights into the future of global interest rates, notably focusing on a key US inflation report. The upcoming core Personal Consumption Expenditures (PCE) price index, the Federal Reserve's favored inflation gauge, is expected to reveal a 0.4% monthly increase. Recent minutes from the Federal Reserve's January meeting suggested that interest rates might have reached their peak for the current tightening cycle, with future decisions hinging on whether US inflation's persistence is temporary or enduring.
John C. Williams, President of the New York Federal Reserve, suggested that rate reductions later this year are a possibility but would only occur if necessary. Similarly, Federal Reserve Governor Christopher J. Waller advocated for postponing rate cuts to assess if the inflation surge in January was an anomaly.
Meanwhile, the European Central Bank (ECB) is cautiously awaiting first-quarter data to confirm easing inflation before adjusting its tight monetary policy, though an increase in wages could justify some relaxation. The ECB's precise timing for policy easing remains undetermined, awaiting further data.
Key data releases are also awaited, including the US GDP Annualized for Q4 and German consumer statistics. In the UK, the GfK Consumer Confidence index indicated a dip in economic optimism, though recent PMI data provided some support to the British Pound by suggesting an economic recovery. The Bank of England, like other central banks, is expected to maintain a cautious approach amidst improving global risk sentiment and a potential return to the 2% inflation target by April.
In Japan, upcoming consumer price data could show a slowdown in core inflation, posing a challenge to the Bank of Japan's (BoJ) plans to exit negative interest rates, which has kept the yen under pressure.
The dollar's strength also influenced commodity markets, with gold prices slightly decreasing due to the stronger dollar and Middle East tensions while oil prices dropped, extending previous losses amid concerns that persistent high US inflation could postpone interest rate cuts, affecting global fuel demand growth.
Navigating the Economic Shift: Japan's January 2024 CPI Analysis

Meeting the Target: Japan's CPI rises by 2.0% year-on-year in January 2024, aligning with the BOJ's inflation goal and signaling a potential change in long-standing monetary policy.

Sectorial Insights and Monetary Policy Implications: Despite the mixed sector performance, with energy prices dropping and accommodation fees soaring, market anticipation grows for an end to the BOJ's negative interest rate policy by spring 2024 amidst rising underlying inflation.

Japan's January CPI Meets BOJ Target

The Consumer Price Index (CPI) for Japan in January 2024 has been reported at a 2.0% year-on-year increase, meeting the Bank of Japan's (BOJ) inflation target and suggesting a potential shift in monetary policy. This rate of inflation is significant as it could prompt the BOJ to consider its first interest rate hike since 2007. The core-core CPI, excluding both fresh food and energy, also rose by 3.5% from the previous year, indicating persistent underlying inflationary pressures.

In a detailed look at the various sectors, energy prices have notably decreased by 12.1%, contributing to the tempered overall inflation rate. Food prices, while still on the rise at 5.9%, have shown a deceleration in growth. Accommodation fees have surged by 26.9%, likely influenced by the rebound in tourism. Service prices have increased by 2.2%, slightly higher than the rise in goods prices at 2.1%.

Market expectations are now leaning towards the BOJ ending its negative interest rate policy possibly by the spring of 2024. This anticipation is based on the service sector prices, which may reflect the increased labor costs due to Japan's tight labor market. The January CPI reading is the lowest since March 2022, suggesting a slowdown in inflation. However, the impact of higher import costs, partly due to a weaker yen, appears to be declining.

BOJ Governor: Rising Inflation Spurs Interest Rate Hike Speculation

BOJ Governor Kazuo Ueda has acknowledged that underlying inflation is on the rise, with price increases spreading from goods to services. Despite the current slowdown, the core CPI is expected to stay above 2 percent throughout the year. Any further interest rate hikes will likely rely on an uptick in private consumption, which needs to be supported by real wage growth.

In the previous year's shunto (spring wage negotiations), Japanese firms agreed to an average wage increase of 3.6%, which could influence future inflation trends. As the economic landscape evolves, the CPI data for January 2024 serves as a critical indicator of Japan's economic health, with the BOJ's policy decisions being closely watched by economists and market participants alike. For those seeking the most current and comprehensive information, the Japanese Statistics Bureau and the Bank of Japan provide official reports and statements.
Dollar Stabilizes Amid Global Economic Updates: Inflation Data, Central Bank Moves, and Commodity Price Shifts

The dollar remained stable on Friday, poised to end a three-week decline, fueled by higher than expected US inflation figures that hinted at a possible delay in Federal Reserve interest rate cuts. The upcoming Federal Reserve meeting next week is highly anticipated, with investors keen on the interest rate projections (dot plot) and Federal Reserve Chair Jerome Powell's commentary, although no changes in interest rates are currently expected.
Philip Lane, the Chief Economist of the European Central Bank (ECB), emphasized the need for the ECB to assess inflationary pressures more clearly in June. ECB President Christine Lagarde indicated that the initial rate reductions are more likely in June rather than April, as per her statements in the March meeting press conference. Additionally, the release of the February Consumer Price Index (CPI) data from France and Italy is awaited later on Friday.
In the UK, GDP growth for January showed a 0.2% month-over-month increase, signaling an exit from recession. This development has led markets to adjust their expectations for a Bank of England (BoE) rate cut from June to August. BoE Governor Andrew Bailey discussed the duration for which high interest rates need to be maintained, acknowledging signs that tight monetary policies are effectively reducing inflationary pressures.
The yen held steady as investors awaited a Bank of Japan (BOJ) meeting next week, which could mark a significant departure from its negative interest rate policy, especially if major Japanese companies implement expected wage increases. The full response of Japan's largest firms to union wage hike demands has bolstered expectations for a policy shift by the BOJ, supporting the safe-haven yen amid a generally cautious market sentiment.
Gold prices were set to break a three-week winning streak on Friday, as the unexpected spike in US inflation led traders to reconsider the pace and magnitude of potential Federal Reserve rate cuts this year.
Oil prices saw a slight decline on Friday but were on course for a nearly 4% weekly increase, led by the International Energy Agency's (IEA) upward revision of its 2024 oil demand forecast, the fourth such adjustment since November, and a surprising drop in US inventories. This revision comes in the context of disruptions to Red Sea shipping due to Houthi attacks.
Dollar Index Surges Ahead of Crucial Inflation Report, ECB and BoE Policies in Focus

The Dollar Index experienced an uptick, reaching approximately 104.6 on Friday, positioning itself near a six-week peak. This movement comes as investors eagerly await a crucial US inflation report, anticipated to shape the future direction of interest rates. However, it is expected that trading volumes will be subdued due to the US markets closing for the Good Friday holiday.
Attention is drawn to the forthcoming PCE price index report, the Federal Reserve's preferred measure of inflation, to discern whether the trend of surging inflation figures will persist. Federal Reserve Governor Christopher Waller earlier remarked that the central bank might pause rate reductions in light of robust inflationary pressures.
In Europe, ECB official Villeroy observed a significant drop in core inflation, maintaining optimism in achieving the ECB's 2% inflation goal. However, he warned of the growing risks of delaying rate cuts. Fabio Panetta, another ECB executive board member, underscored the emerging conditions favorable for monetary policy easing, noting the dampening effect of restrictive policies on demand and the consequent sharp decline in inflation. He also mentioned a diminished threat to price stability.
From the Bank of England, Jonathan Haskel adopted a hawkish stance, suggesting that rate cuts should be considerably deferred. Catherine Mann echoed this sentiment, advising against high expectations for interest rate reductions within the year. Despite this, the British Pound faced pressure due to data indicating the UK's economy slipped into a recession in the latter half of 2023, with a 0.3% contraction in GDP for Q4, aligning with initial estimates. Speculation continues around the Bank of England possibly implementing three quarter-point rate cuts through 2024, with Governor Andrew Bailey indicating such decisions will be explored in upcoming policy meetings.
The Bank of Japan's cautious approach to maintaining accommodating monetary conditions has placed downward pressure on the Japanese Yen. Recent statistics show Tokyo's Consumer Price Index rising by 2.6% YoY in March, mirroring the increase in February. Excluding fresh food and energy, the CPI saw a 2.9% YoY rise, a slight decrease from February's 3.1% increase. Prime Minister Fumio Kishida affirmed the central bank's current monetary stance and committed to collaboration between the government and the Bank of Japan to foster wage growth and combat deflation.
However, potential interventions by Japanese authorities may limit the Yen's depreciation. Finance Minister Shunichi Suzuki expressed readiness to address any erratic foreign exchange movements with urgency.
In commodities, gold prices remained robust, exceeding $2,230 an ounce amid speculation of imminent rate cuts by major central banks and increased safe-haven demand due to geopolitical tensions.
Crude oil futures also saw a rise, with WTI crude increasing by 2.24% on Thursday, marking a third consecutive month of gains. This uptrend is supported by OPEC+'s supply management efforts and ongoing geopolitical unrest in Eastern Europe and the Middle East. Notably, Ukrainian drone attacks on Russian refineries have impacted a significant portion of Russia's oil processing capability, further influencing oil prices.
Dollar Index Hovers Near Five-Month Peak Amid Mixed Economic Signals and Central Bank Speculations

The dollar index saw minimal change on Wednesday closely approaching its five-month peak of 105.1 reached the previous day. This movement came as traders evaluated strong US economic indicators and reconsidered their expectations for Federal Reserve interest rate reductions. February's job openings slightly surpassed projections, reaching 8.756 million against an anticipated 8.75 million. Additionally, factory orders experienced a more significant rebound than expected, in line with the ISM manufacturing report, which indicated the first growth in factory activity in 18 months.
On Tuesday, San Francisco Fed President Mary Daly and Cleveland Fed President Loretta Mester suggested the Federal Reserve might cut interest rates three times this year. Market participants are keenly awaiting comments from Chair Powell, alongside the release of the ADP employment report and the ISM Services PMI.
In Europe, European Central Bank (ECB) official Robert Holzmann expressed openness to a rate cut in June, contingent on further supportive data. Meanwhile, ECB policymaker Yannis Stournaras hinted at the possibility of reducing rates by up to 100 basis points throughout the year, although consensus on this within the ECB remains elusive. The preliminary Eurozone Harmonized Index of Consumer Prices (HICP) for March is anticipated.
In the UK, Bank of England (BoE) Governor Andrew Bailey noted recent signs of decreasing inflation, suggesting the economy is nearing a point where interest rate reductions could commence. However, BoE official Jonathan Haskel cautioned that such cuts should still be considered distant despite the positive trend in inflation rates. Chancellor of the Exchequer Jeremy Hunt remarked that nearing the inflation target could pave the way for the BoE to contemplate rate cuts.
The Bank of Japan (BoJ) maintains a cautious approach towards further policy tightening, which has not significantly bolstered market optimism. Japanese Finance Minister Shunichi Suzuki's comments on preventing excessive exchange-rate volatility have given some support to the Japanese Yen.
Gold prices climbed to 2288 on Wednesday, continuing their ascent amid rising demand for safe-haven assets due to geopolitical uncertainties. This increase occurred despite higher US yields and diminishing expectations for a Fed rate cut in June.
Oil prices remained at five-month highs in anticipation of an OPEC+ meeting amidst concerns over global supply disruptions caused by escalating tensions in the Middle East and renewed attacks on energy facilities in Ukraine and Russia.
Global Economic Signals Prompt Speculation on Imminent Interest Rate Cuts

On Thursday, the dollar dipped to a one-week low, influenced by recent economic data that fueled expectations for imminent interest rate reductions in the US. This downturn was initiated by an unexpected deceleration in US service sector growth on Wednesday. Despite this, the dollar has remained the top-performing currency among the G10 for the year, as expectations for rate cuts have significantly decreased in recent months.
Federal Reserve officials, including Chair Jerome Powell, emphasized on Wednesday the necessity for ongoing debate and further data analysis before any decision to cut interest rates, an action financial markets anticipate might happen in June.
In the Eurozone, the inflation rate for March fell more than expected, leading to speculation about the European Central Bank (ECB) potentially lowering interest rates in June. The Eurozone Harmonized Index of Consumer Prices (HICP) reported a year over year increase of 2.4% for March, below the forecasted 2.6%. Remarks by ECB officials, including Pablo Hernandez and Robert Holzmann, suggested that rate cuts could commence in June due to a consistent inflation slowdown across the bloc.
In the UK, futures traders are betting on a 25 basis point rate cut by the Bank of England (BoE) in June, with the probability currently at 66%. BoE Governor Andrew Bailey noted recent positive trends toward cooling inflation, suggesting that the UK economy is approaching a juncture where interest rate reductions could be contemplated. The UK's Manufacturing PMI for March showed unexpected growth after a 20 month contraction, driven by strong domestic demand and leading to a surge in business optimism among manufacturers.
The Japanese Yen (JPY) is trading slightly above a multi-decade low against the dollar, with the Bank of Japan's (BoJ) continued dovish stance and a positive market sentiment pressuring the yen. However, speculation about potential market intervention by Japanese authorities to support the yen has tempered bearish bets against it.
Gold prices remained near an all-time high of $2,300 an ounce on Thursday as investors processed remarks from Federal Reserve officials. Chair Jerome Powell stated on Wednesday that the Fed requires further evidence of inflation sustainably moving towards the 2% target before considering interest rate cuts.
Crude oil futures are trading at their highest levels since October due to supply concerns, geopolitical risks, and OPEC+ output cuts. OPEC+ announced on Wednesday that it would maintain its current oil output policy, focusing on compliance and requiring members who exceeded their supply quotas in the first quarter to present compensation plans.