The US Dollar had its best trading day in September, following the decision by the US Federal Reserve to raise interest rates and given the robust state of the US economy. Despite the strength of the dollar, emerging market currencies such as the Turkish Lira (TRY) or the South African Rand (ZAR) were still able to further recover.
Gold fell to its lowest level in almost six weeks as the dollar further gained momentum and the statements from the Federal Reserve made investors expect further rate hikes in the future.
Most futures indices were trading lower on Friday morning, with the exception of Asian indices, such as the Nikkei 225 (Japan 225) and Chinese/Hong Kong indices like the Hang Seng Index (Hong Kong 50).
After a strong trading performance in most major cryptocurrencies, the uptrend continued on Friday, with Bitcoin closing in on the high from last week around $6,800 and Litecoin reaching a 3-weeks high. Currently three mining technology companies are preparing a public sale of their stocks (IPO), such as Bitmain, which plans to eventually place its stocks at the Hong Kong Stock Exchange.
On Friday France publishes its Producer Prices Index (PPI) and Consumer Price Index (CPI) data. CPI data will be also released for Italy and the European Union. In Germany the Unemployment Rate will be disclosed. The United Kingdom will publish its Gross Domestic Product (GDP) data for Q2. Canada also releases its GDP data, as well as Raw Materials Price Index and Industrial Product Price Index data.
In the US data on personal Income, Consumer Spending, the Core PCE Price Index and the University of Michigan Consumer Sentiment will be released.
The dollar rallied a day after the Federal Reserve announced a rate hike, increasing interest rates to 2.25%. The EUR/USD had the biggest drop in one day for September on Thursday, as the dollar further strengthened given the strong economic performance with Durable Goods New Orders up at 4.5% m/m (expected +2.2%) and the GDP on target at +3% q/q in Q2 of this year.
European data meanwhile was seen mixed with the EC Economic Sentiment at 110.0 (expected 111.3) below expectations and Private Sector Lending stable at 3% in August.
On Friday France publishes its Producer Prices Index (PPI) and Consumer Price Index (CPI) data. CPI data will be also released for Italy and the European Union. In Germany the Unemployment Rate will be disclosed.
In the US data on personal Income, Consumer Spending, the Core PCE Price Index and the University of Michigan Consumer Sentiment will be released.
Gold
The strong dollar pushed gold prices to the lowest level in almost six weeks. While a stronger dollar makes gold more expensive in non-dollar economies, the prospect of higher interest rates in the US is also weighing on the safe haven precious metal. Given the nature of gold as an asset that does not bear any interest, in theory it would become less attractive to investors compared to other safe haven assets, like US Treasury Bonds.
Besides US economic data, such as the Core PCE Price Index, gold traders might look at the Commodity Futures Trading Commission's (CFTC) weekly Commitments of Traders (COT) report, which will show the net speculative positions on future contracts, such as gold. Over the last six weeks the report indicated that more speculative short positions, compared to long positions were being held by investors.
WTI Oil
Oil prices saw only limited upside on Thursday. Previously factors like tensions in the Middle East and the trade war with China were some of the factors affecting the price of energy commodities. Currently oil markets see uncertainty due to the US sanctions against the Iranian oil sector, which will kick in at the beginning of November. Some analysts believe that even if other countries, such as Saudi Arabia would increase production to cover for the Iranian shortfall, this would still take time.
On Friday the US Baker Hughes Oil Rig Count will be released, indicating the quantity of operating oil rigs. The number of operating oil rigs stayed within the tight range of 858 and 869 since May, given the currently limited capacity of oil pipelines in oil rich regions of the US, such as the Permian Basin. Analysts believe that the pipeline constraints in the Permian Basin could be relieved completely by the end of next year if construction continues at the current fast pace.
US 500
Equity indices overall closed higher on Thursday as Jobless New Claims were at 214 thousand slightly better than expected and the strong performance of Durable Goods New Orders surprised analysts with a growth of 4.5% m/m in August, above the expected 2.2%.
Especially utility sector (US Utilities ETF +1.09%) and biotech (US Biotech ETF +1.08%) stocks traded overall higher.
Apple (NASDAQ:AAPL) (+2.28%) traded up, after analysts from JP Morgan gave the company a positive investor rating citing the growing service business and increase in pricing for the new iPhone range.
Tesla (NASDAQ:TSLA) shares plunged by a double-digit percentage in after-hours trading after the US Securities and Exchange Commission (SEC) announced that it would sue Tesla CEO Elon Musk for his tweet, where he announced he would take Tesla private with “funding secured”, as according to the SEC this was misleading to investors due to false claims. Besides monetary fines, the SEC is also seeking to prohibit Musk from being an officer or director of a public company.
The first companies are coming out with their quarterly reports this earnings season, such as PepsiCo (NASDAQ:PEP) next Tuesday or Costco (NASDAQ:COST) next Thursday.
