Stocks experienced a slight decline on Tuesday, while the dollar remained steady as investors eagerly awaited the release of minutes from the Federal Reserve’s recent policy meeting. The purpose was to assess the potential timing and extent of interest rate cuts expected for the year.
Gold saw a slight retreat from its all-time high on Monday, and crude oil prices dipped amid concerns about prolonged high U.S. interest rates, with Fed officials maintaining a cautious stance on recent inflation trends.
Cryptocurrencies like ether and bitcoin surged to fresh six-week highs amid speculation that the U.S. Securities and Exchange Commission (SEC) might approve a spot ether exchange-traded fund.
Currently, markets anticipate approximately 41 basis points of Fed rate reductions for the year, with a quarter-point cut fully priced in for November.
Investors quickly adjusted their expectations following data earlier in the month indicating a moderation in consumer price pressures in April, following three months of unexpected inflationary pressures.
However, Fed officials remain hesitant to declare victory over inflation. Vice Chair Philip Jefferson stated on Monday that it was premature to determine if the slowdown would be long-lasting, while Vice Chair Michael Barr suggested that restrictive policies require more time to take effect.
The upcoming release of minutes from the last Fed meeting, scheduled for Wednesday, could offer valuable insights into future policy decisions, although these discussions took place before last week’s softer Consumer Price Index (CPI) reading.
Europe’s benchmark STOXX index of 600 stocks slipped 0.3%, following an earlier decline of 0.9% in MSCI’s broadest index of Asia-Pacific shares outside Japan.
U.S. markets appeared poised to follow a similar trend, with Nasdaq futures edging 0.08% lower, while S&P 500 futures remained flat after a modest gain of 0.1% on Monday.
“Market sentiment remains relatively robust, with implied volatility low, supported by greater confidence in U.S. rate cuts this year,” noted Kyle Rodda, senior markets analyst at Capital.com.
At the same time, record highs for metals such as gold and copper are seen as signals of improving global economic activity, potentially contributing to persistent inflationary pressures.
Gold eased 0.3% to about $2,417 per ounce, after reaching nearly $2,450 for the first time overnight.
The dollar remained strong against major currencies, with the dollar index unchanged at 104.62 after rebounding from a five-week low.
Yields on 10-year Treasury bonds remained stable at 4.4355%, after a slight increase of 1.7 basis points on Monday.
Brent crude futures declined 0.8% to $83.04 a barrel, while U.S. West Texas Intermediate crude (WTI) eased 0.7% to $79.16.
Meanwhile, traders capitalized on cryptocurrencies following reports that the SEC had requested exchanges seeking to trade ether ETFs to update regulatory filings, raising expectations of approval this week.
Bitcoin surged to $71,957, and ether reached $3,720.80, both hitting levels not seen since April 9.
“Speculation surrounding the ether ETF has certainly fueled the move, adding momentum to the crypto bull market that reignited after last week’s cooler U.S. CPI data,” observed IG analyst Tony Sycamore.
Sycamore expects bitcoin to test its all-time high of $73,803.25 in the near term before aiming for $80,000.
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