Stock Indexes Rise and Dollar Weakens While Oil Rallies

March 30, 2023 at 10:20 PM

Stock indexes advanced on Thursday, although they finished below session highs, while the dollar declined as investors shifted their focus to upcoming inflation data and the interest rate hike outlook. Longer-dated U. Treasury yields fell in anticipation of Friday’s personal consumption expenditures (PCE) data release. Economists predict core prices to have risen by 0.4% in February and posted a 4.7% annual increase.

The US dollar slipped to a one-week low against the euro, bolstered by German inflation data. Oil prices increased over 1% due to lower US crude stockpiles and an export halt from Iraq’s Kurdistan region, counterbalancing pressure from a smaller-than-expected cut to Russian supplies.

Investors’ risk appetite on Thursday was fueled by hopes of bank turmoil containment and speculation that central banks worldwide are nearing the end of their interest rate hiking cycles, according to Jeff Kleintop, Chief Global Investment Strategist at Charles Schwab. However, hawkish comments from Federal Reserve officials raised concerns among investors, who were bracing for Friday’s critical economic data and potential volatility from traders’ end-of-quarter position adjustments.

Despite recent events, including the collapse of two US banks and the rescue of a major European bank, which led to speculation that the Fed might halt rate hikes to avoid a broader crisis, Federal Reserve officials signaled that more work was needed to address inflation. The focus on inflation and the Fed’s stance pushed stock markets higher, with technology shares contributing the most significant gains.

In the currency market, the dollar index fell 0.477%, while the euro rose 0.57% against the dollar. The Japanese yen and Sterling also strengthened against the greenback. US crude oil prices rose 1.92%, and Brent increased by 1.25%. Gold prices gained as a weaker dollar and lower bond yields drove demand for the precious metal, with investors closely watching US inflation data to assess the Fed’s next move.

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