Dow's Upward Surge, Currency Movements, and Gold's Reaction to Global Dynamics | Daily Market Analysis

Key events:

• USA - Initial Jobless Claims
• USA - Philadelphia Fed Manufacturing Index (Nov)

The Dow Jones Industrial Average is on an upward trajectory for the fourth consecutive session this Wednesday, buoyed by positive October releases from the Producer Price Index (PPI) and US Retail Sales. These economic indicators, coupled with Tuesday's data, reinforce the belief that the economy is smoothly transitioning into the anticipated "soft landing" scenario. In this scenario, inflation eases without adversely impacting consumer spending and employment.

Throughout this week until Wednesday, the Dow Jones has seen a cumulative increase of approximately 2%, with an additional gain of about 0.4% on Wednesday alone. While the S&P 500 and NASDAQ Composite experienced robust advances during the session, their positive momentum was modest by the closing bell. Specifically, the Dow Jones Industrial Average recorded a 0.47% increase, the S&P 500 saw a gain of 0.16%, and the Nasdaq Composite, after earlier gains, closed the session flat.

On Wednesday, the Canadian Dollar continued to build on its gains, extending its positive trend as broader markets embraced a renewed sense of risk-on sentiment. Upbeat wholesale and business sales figures in Canada surpassed expectations, providing support for the Loonie. However, the appreciation of the Canadian Dollar is being restrained by declines in Crude Oil prices.

Meanwhile, the Australian Dollar exhibited a downward movement, slipping below the psychological level of 0.6500 on Thursday. This negative bias was influenced by the Australian Employment data release. Although the seasonally adjusted Employment Change reported a substantial increase of 55K in October, surpassing market expectations of 20K and the previous month's 6.7K, the majority of the added jobs were part-time positions, mitigating the overall positive impact.

Australia's Unemployment Rate in October met expectations at 3.7%, compared to the previous figure of 3.6%. The AUD/USD pair experienced volatility in the previous session following the release of economic data from the United States on Wednesday.

The Japanese yen depreciated beyond the 151 level once again, driven by the overnight strength in the dollar. This prompted traders to monitor for potential currency market intervention by the government. Japanese exports exceeded expectations in October, while imports fell below projections.

The US dollar rebounded from a two-month low earlier in the week, with overnight gains extending into Asian trade. The dollar index and dollar index futures recorded a 0.1% rise on Thursday, following a 0.4% increase in the previous session.

Resilience in US retail spending led traders to reconsider expectations regarding the Federal Reserve's timeline for interest rate cuts in 2024. Although earlier data indicated a slowdown in US inflation, robust consumer spending suggested persistent inflation in the coming months.

Despite this, the US dollar continued to recover from significant losses during the week. Softer inflation readings led traders to factor in no further rate hikes by the Federal Reserve, aligning with the central bank's commitment to a data-driven approach and the intention to maintain higher rates for an extended period.

Gold prices stabilized on Thursday, briefly halting a recent rebound rally in the wake of robust US retail sales data that injected a degree of uncertainty into the trajectory of US monetary policy.

The precious metal experienced a marginal decline on Wednesday, following two consecutive days of substantial gains. This dip coincided with the US dollar's recovery from a 2-and-a-half-month low and stabilization of Treasury yields after recent declines.

While gold benefited somewhat from safe-haven demand, spurred by high-level US-China talks where Presidents Xi Jinping and Joe Biden convened in San Francisco, the impact was tempered. The meeting led to some improvement in Sino-US relations, as both parties agreed to reopen military channels.

However, a post-meeting comment by Biden, where he referred to Xi as a "dictator," introduced a potential source of tension that could unsettle Beijing.