Canada GDP, U.S. Core PCE Price Index and Unemployment Claims

The dollar value showed little change against most major currencies on Wednesday with the dollar index (USDX) ending the session around 0.12% on Wednesday, however those gains were reversed early on Thursday, ahead of key inflation data that could determine the course of interest rates in the coming FOMC meetings. The core PCE price index is forecast to rise by 0.4% for the month, and 2.8% on the year.

According to the CME Fedwatch tool, the possibility that the first rate cut in 2024 will take place in the May FOMC meeting rose from 20.7% to 22.2% while the same possibility for a rate hike taking place in June is at 49.4%.

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Wall Street’s continues to lose momentum on Wednesday, with all three main stock indices moving further away from recently reached all-time ahead of the upcoming PCE price index data. In company news, Beyond Meat Inc rose by almost 30% after reporting better-than-expected quarterly revenue, and also forecasting improved margins in the second half of the year amid a turnaround plan. According to Beyond Meat CEO the plan includes taking steps to steeply reduce operating expense and cash use. Several big market players announce their Q4 earnings reports today among which are GoodRx, ACI, Best Buy, Autodesk, Zscaler and Dell Technologies.

On the energy front, the two main crude benchmarks WTI and Brent both extended their declines from the previous session as a larger-than-expected increase in U.S. crude inventories raised concerns over slowing global demand. Another factor possibly adding pressure on prices is the prospect of a possible Israel Hamas truce.

For today, investors focus would most likely shift towards the core PCE price index data to give further clues on when the Federal Reserve is likely to begin cutting rates. Those expectations have been pushed to June, from May, on strong economic growth, stable inflation and discouraging commentary from Fed officials. Some price action could also be observed upon the release of quarterly GDP numbers from Canada as well as US data on jobless claims, personal income, personal spending, pending home sales, the Chicago PMI and a speech by FOMC Member Mester.

EUR/USD

The Euro stumbles for the second straight day against the US Dollar as investors assess recent data from the United States, revealing the economy remains strong.

The US Bureau of Economic Analysis reported the second estimate of the Gross Domestic Product (GDP) for the last quarter of 2023, coming a tenth lower at 3.2% YoY compared to the 3.3% preliminary reading. EUR/USD traders’ eyes are laser-focused on the release of the inflation figures for January.

Across the pond, the Eurozone economy is stable, as Economic Sentiment fell again in February, from 96.1 to 95.4, below estimates of an improvement to 96.7.

Gold

Gold prices ticked up on Wednesday adding gains of 0.23% as market participants strapped in for key economic data and comments from U.S. central bank officials on the timeline of interest rate cuts.

Data showed the U.S. economy grew at a solid clip in the fourth quarter amid strong consumer spending but appeared to have lost some speed early in the new year.

Recent Fed commentary and hot inflation data has pushed bets of Fed's first rate cut to June, compared to March at the start of the year. Higher rates tend to discourage investment in non-yielding bullion.

WTI Oil

Oil prices settled lower on Wednesday as markets digested differing cues on supply from the U.S. and the Organization of Petroleum Exporting Countries.

But any big moves were limited, with market participants keeping to the sidelines ahead of key U.S. inflation data, which is widely expected to factor into the outlook for interest rates.

Official U.S. inventory data showed stockpiles grew more than expected in the week to February 23. U.S. production also remained at record highs- a trend that markets expect will help plug some supply gaps from OPEC cuts and Middle East disruptions.

US 500

U.S. stocks closed slightly lower on Wednesday, a day ahead of a key inflation reading that could heavily influence expectations for the timing of an interest rate cut from the Federal Reserve. Uncertainty over an upcoming inflation reading and warnings from Federal Reserve officials spurred increased risk aversion. A mixed batch of earnings also made for negative trading signals for Wall Street. U.S. 500 fell 0.32% while US 30 and US Tech 100 lost 0.17% and 0.75% respectively.

Along with the PCE data, reports for weekly initial jobless claims and manufacturing activity are due this week and will also help gauge the economy's strength and path of interest rates.