With inflation lower than expected and the sell-off on Wall Street, the dollar saw a further downside against other major currencies, with the US Dollar Index (USDX) closing 0.55% lower. Even battered emerging market currencies, such as the Indian rupee (INR) the Turkish lira (TRY) were able to gain against the struggling greenback. Reports that Turkey could release the US citizen Brunson, they are holding under house arrest, further helped the lira recovery. His incarceration and subsequent US sanctions previously deteriorated the relations between the US and Turkey, sending the lira lower.
Oil prices saw a further downside on Thursday after the EIA also released a statistic showing a significant build in crude oil and a higher than anticipated increase in gasoline stockpiles. Gold broke out of the range it held for more than two months in an upwards move, possibly due to the demand for safe haven assets in the current market environment.
After another day of losses, most equity future indices started the trading on Friday significantly stronger, with Chinese and Indian indices gaining around two percent, while the NASDAQ (US Tech 100) was also one of the best performing index on Friday morning adding hope that the sell-off could stop.
The sell-off in cryptocurrencies quickly stopped after a rapid decline just a day earlier. Bitcoin prices stabilized well above the $6,000 level, while Ethereum fell below $200. Of the major cryptocurrencies Ripple was one of the best performers on Friday morning, recovering a significant part of its earlier losses.
On Friday the European Industrial Production data will be released, followed by Import/Export Prices and University of Michigan Consumer Sentiment statistic from the United States.
The dollar saw a further downside after CPI data for the US showed a more timid inflation than anticipated, while comparable data for Europe was mostly as expected with the French CPI at 2.2% y/y and the Spanish CPI at 2.3% y/y even higher than anticipated for September. The German CPI at 2.3% y/y, which was published on Friday morning was also as expected.
As inflation is one key economic figure, which central banks use when determining their interest rate decision, higher inflation in theory urges central banks to raise rates. The US Federal Reserve has a target of keeping inflation around 2%, while the European Central Bank (ECB) has the target of below 2%.
On Friday the European Industrial Production (IP) statistic will be released. In the US data on Consumer Expectations/Sentiment and Import/Export Prices will be released.
Gold
Gold had a breakout above the range it held for more than two months. Analysts attributed the rise in gold prices to the declines in the stock markets after investors started pricing rising bond yields in their calculations. It is not clear what impact the statement from US President Trump about the Federal Reserve had, as he bashed the Fed’s hawkish monetary policy of raising interest rates as “crazy”. Lower interest rates could make gold in theory a comparably more appealing investment, as then the difference between bonds which bear interest and gold reduces. However it remains doubtful that the relatively independent Fed would act as envisioned by Trump, as it tries to keep the economy from overheating with the unemployment rate at a record low. The relatively lower inflation as the Consumer Price Index with +2.3% y/y (expected 2.4%) fell behind expectations however could have given some investors hope that this would slow down the pace with which the Fed proceeds with its rate hikes.
Regarding US dollar related data releases, for Friday Import/Export Prices and the University of Michigan Consumer Sentiment are expected.
WTI Oil
Oil prices further declined on Thursday, given concerns about a possible global economic slowdown as key equity indices further declined. Data from the Energy Information Agency (EIA) added pressure on prices as stockpiles for crude oil increased by 6 million barrels compared to the previous week. This is also in in line with the uptick seen in the statistic from the American Petroleum Institute (API), which indicated oil stockpiles up by almost 10 million barrels in its statistic released a day earlier. Stockpiles in gasoline also
gained by almost 1 million barrels, clearly surpassing expectorations of minimal changes in storage.
Early on Friday oil prices were seen recovering together with a recovery in equity values, while news about robust crude oil import numbers from China could have also helped with the upwards movement.
On Friday the US Baker Hughes Oil Rig Count will be published, showing the number of operating oil rigs.
US 500
In another day of declining prices, the S&P 500 (US 500) fell to the lowest level in more than 3 months, before a moderate recovery set in on Friday night. Especially the bank (US Banks ETF -3.09%) and real estate (US Real Estate -2.72%) stocks closed lower by a significant margin, while for example the chip sector (US Semiconductors -0.83%) was relatively stable in the declining markets environment.
Stocks of the fintech company Square (NYSE:SQ) (-10.95%) declined for the second day in a row by a double-digit percentage, after the company’s CFO announced her departure, while Snapchat (+3.18%) managed to recover from the new low and end the series of declines. However it should be noted that unless there is a significant recovery on Friday, this will be the 10th consecutive week, where Snap’s share price closes lower.
Shares of the pharmacy CVS (-7.32%) closed significantly lower after the Department of Justice approved their acquisition of the insurance Aetna (NYSE:AET), with investors being concerned about the impact of the takeover on the company’s earnings.
On Friday some of the key banks on Wall Street, such as JP Morgan and Citigroup (NYSE:C) are scheduled to publish their quarterly earnings.
