Daily analysis 09/3/2024

3. 9. 2024 - Josef Brynda

Latest news

• AUD dropped due to weakness in iron ore prices, reflecting China's economic slowdown.
• USD traded sideways in thin trading due to US Labor Day holiday.
• EUR was slightly higher, with ECB's Nagel expected to speak today.
• Focus remains on US labor data this week, starting with ISM Manufacturing today.
• Australian dollar fell back overnight after outperforming on Monday.
• Swiss CPI and GDP data are on the radar today, potentially impacting CHF.
• Markets are pricing 60bps rate cuts from the ECB by the end of the year, the least since July 31st.
• European bonds tumbled as investors brace for new debt issuance and adjust rate cut expectations.
• US ISM Manufacturing data for August is expected at 47.5 vs 46.8 prior.
• Eurozone final manufacturing PMI for August was slightly higher at 45.8, while UK's was unchanged at 52.5.
• Key economic events this week include US JOLTS job openings, ADP employment change, and Nonfarm Payrolls.
• Short-term USD crisis triggers include pronounced US disinflation, carry trade unwinding, or extended speculative short positioning.
• Speculator positioning turned net short on the dollar for the first time since January, raising red flags about further weakness.
• Long-term threats to USD include rising US debt, de-dollarization trends, and potential loss of confidence in the Federal Reserve.
• There's a 33% chance of a 50 basis points cut this month, with a quarter-point reduction fully expected.
• Markets have been anticipating a 25 basis point rate cut by the Federal Reserve for several weeks
• Long-term Treasury yields rose to their highest point since mid-August, supporting the dollar.
• Recent inflation data suggests the Fed might opt for a smaller rate cut.
• A stronger-than-expected payroll number and lower unemployment rate could boost market confidence in growth prospects.

News summary

• The Australian dollar's recent drop due to weakness in iron ore prices, reflecting China's economic slowdown, is likely to continue pressuring the AUD. This trend may extend to other commodity-linked currencies, potentially leading to further depreciation against major currencies like the USD and EUR in the short term.
• With the focus on US labor data this week, starting with ISM Manufacturing and culminating in Nonfarm Payrolls, the USD could see increased volatility. A stronger-than-expected payroll number and lower unemployment rate could boost market confidence in growth prospects, potentially strengthening the USD against most major currencies
• The slight rise in EUR, coupled with ECB's Nagel's expected speech, could provide short-term support for the euro. However, with markets pricing in 60bps of rate cuts from the ECB by year-end, the EUR might face downward pressure in the medium term, especially against currencies from regions with more hawkish central bank outlooks.
• The tumble in European bonds and adjustments in rate cut expectations could lead to increased volatility in currency pairs involving the EUR. This might result in a weaker euro in the short term, especially if US Treasury yields continue to rise, supporting the USD.
• Despite current strength, long-term threats to USD including rising US debt and de-dollarization trends could eventually weigh on the currency. This might benefit alternative reserve currencies like the EUR, JPY, or even emerging market currencies in the long run.
• With speculator positioning turning net short on the dollar for the first time since January, there's a risk of a short-term USD rally if these positions are unwound, potentially leading to gains against most major currencies.
• The disparity in rate cut expectations between the Fed and other major central banks could continue to drive forex markets. If the Fed maintains a more hawkish stance relative to peers, it could support the USD against currencies like the EUR and GBP in the medium term.

Daily analysis 09/2/2024

2. 9. 2024 - Josef Brynda

Latest news

• Chinese equities declined due to persistent signs of economic weakness. This downturn reflects ongoing concerns about China's property sector and overall growth trajectory.
• The US dollar recovered last week, regaining some ground after recent losses. This recovery came despite PCE data suggesting room for Federal Reserve rate cuts.
• The euro headed for its worst week since April, underperforming other major currencies. Softer inflation data and dovish ECB comments contributed to the euro's weakness.
• Crude oil prices slumped as OPEC+ prepared to increase output. This drop was exacerbated by concerns about soft demand, particularly in China.
• Copper and silver prices fell due to worries about China's economic health. These industrial metals are particularly sensitive to Chinese demand and growth prospects.
• Bond markets declined as investors braced for a surge in corporate debt issuance. The anticipation of significant new supply, especially after Labor Day, pressured bond prices.
• Markets are closely watching upcoming US jobs data for insights into the labor market. The August jobs report, along with other employment indicators, could influence Federal Reserve policy expectations.
• Eurozone and UK manufacturing PMIs are in focus this week. These indicators will provide updated information on the state of manufacturing activity in these economies.
• US markets are closed for the Labor Day holiday, potentially leading to reduced trading volumes. This holiday could result in muted market activity at the start of the week.
• Core PCE, the Fed's preferred inflation measure, rose 0.2% month-over-month in July. This data reaffirmed that disinflation is progressing, potentially giving the Fed room to begin easing.
• Euro-area inflation softened further in August, reaching its slowest pace since mid-2021. This easing inflation could provide the ECB with more flexibility in its monetary policy decisions.
• China's PMI data signaled continued economic weakness, with manufacturing remaining in contraction. This data underscores the need for further stimulus measures in China.
• The yield curve steepened, with the spread between 10-year and 2-year Treasury yields tightening. This shift in the yield curve reflects changing expectations about future interest rates and economic conditions.
• Gold trades below $2500, facing a potentially challenging month ahead. Traders are watching key US data to gauge the potential scale and pace of upcoming US rate cuts.
• The Australian dollar weakened relative to other currencies. Market participants will be closely watching RBA Governor speeches this week for potential policy insights.

News summary

• The US dollar has shown signs of recovery, regaining ground against major currencies despite PCE data suggesting room for Federal Reserve rate cuts. This resilience indicates that the dollar may continue to strengthen in the short term. However, the upcoming US jobs report could be a pivotal factor in determining the dollar's trajectory. If the labor market shows signs of cooling, it might reinforce expectations of Fed rate cuts, potentially weakening the dollar in the medium term.
• The euro is experiencing its worst week since April, underperforming other major currencies due to softer inflation data and dovish ECB comments. This weakness, coupled with the dollar's recovery, suggests that the EUR/USD pair may continue to decline in the near term. The upcoming Eurozone manufacturing PMI data will be crucial in determining the euro's direction. If the data shows further weakness, it could exacerbate the euro's decline against the dollar.
• The Australian dollar has weakened relative to other currencies, largely due to concerns about China's economic health With China's PMI data signaling continued economic weakness, commodity currencies like the AUD are likely to face downward pressure. The AUD/USD pair may continue to decline, especially if upcoming RBA Governor speeches hint at a dovish stance.
• The performance of the Canadian dollar is likely to be affected by the decline in oil prices as OPEC+ prepares to increase production. This could put pressure on the CAD, which could lead to a strengthening of the USD/CAD currency pair in the short term.  The Canadian dollar is also coming under pressure due to its debt burden, which has risen significantly over the past year.
• The British pound's performance will largely depend on the upcoming UK manufacturing PMI and its comparison to Eurozone data. If the UK shows relative economic strength, it could support the GBP against the EUR.
• Next week it will be very important to watch the data that decidesount and further development of the major currency pairs, if it turns out that the economy in AMERICA is not weakening at a pace suitable for cutting interest rates, for example, that the unemployment data does not show an increasing pace, speculators could reassess their expectations

Daily analysis 08/28/2024

29. 8. 2024 - Josef Brynda

Latest news

• US dollar recovered on risk aversion and month-end demand.
• EURUSD trades back below 1.11 after German statewide CPI
• Nvidia's shares fell 7% despite earnings beat, impacting tech sector sentiment.
• Atlanta Fed President Bostic hinted at potential rate cuts, affecting USD outlook.
• Australia's July inflation came in higher than expected at 3.5% YoY, supporting AUD.
• Spanish and German CPI data due, potentially impacting EUR.• US Q2 GDP revision and jobless claims to be released, influencing USD.
• Treasury yields ended higher, with the 10-2 yield curve inversion close to turning positive.
• Oil prices dropped on smaller U.S. stockpile reduction and Chinese demand concerns.
• Swiss franc outperformed on haven demand but still declined against USD.
• Japanese yen saw a steeper decline despite earlier gains in Asian session.
• Australian dollar outperformed following July inflation report.
• Canadian dollar reversed lower from over five-month highs.
• New Zealand dollar made solid gains on Thursday, reaching an eight-month high of $0.6295.
• New Zealand's business confidence jumped to the highest level in a decade in August.
• Markets have fully priced in a 25-basis-point rate cut from the Fed next month.
• The dollar index was down 0.07% at 100.94, nearing a 13-month low.
• Euro inched back toward its 13-month high, last trading at $1.1135.
• Sterling rose 0.14% to $1.3209, close to its strongest level since March 2022.
• Australian dollar hovered near an eight-month top, gaining 0.27% to $0.6803.
• Bank of Japan policymakers signaled continued interest rate hikes if inflation stays on course.

News summary

• The forex market is experiencing significant movements driven by a combination of economic data, central bank signals, and market sentiment. The US dollar's recovery on risk aversion and month-end demand is being counterbalanced by expectations of potential rate cuts, as hinted by Atlanta Fed President Bostic. This has led to a weakening dollar index, which is approaching a 13-month low at 100.94. However, after the release of various indices in Germany, the euro corrected against the dollar to around 1.107.
• Major currencies are showing mixed performances against the dollar. The euro is inching towards a 13-month high, trading at $1.1135, while sterling has risen to $1.3209, near its strongest level since March 2022. The Australian dollar is hovering near an eight-month peak, supported by higher-than-expected July inflation data. Meanwhile, the New Zealand dollar has made substantial gains, reaching an eight-month high of $0.6295, bolstered by a surge in business confidence to a decade-high in August.
• The Japanese yen experienced a steeper decline despite earlier gains, while the Swiss franc outperformed on haven demand but still fell against the USD. The Canadian dollar reversed from over five-month highs, likely due to dropping oil prices caused by smaller U.S. stockpile reductions and Chinese demand concerns.
• Upcoming economic data releases, including Spanish and German CPI figures, US Q2 GDP revision, and jobless claims, are expected to further influence currency movements. The market has fully priced in a 25-basis-point rate cut from the Fed next month, which could continue to pressure the US dollar.
• In the tech sector, Nvidia's 7% share price drop despite an earnings beat has impacted overall sentiment, potentially affecting risk appetite in the forex market. Additionally, the Bank of Japan's signals for continued interest rate hikes if inflation persists could support the yen in the longer term.

5 Things You Need to Know to Start Your Day: Americas

28. 8. 2024 - Josef Brynda

Nvidia Earnings Anticipation                                                                                                                                       Markets are on edge awaiting Nvidia's Q2 fiscal 2025 earnings report, due after Wednesday's close. As a bellwether for AI and the broader market, Nvidia's results could significantly impact market sentiment.

High Expectations                                                                                                                                                        Analysts predict Nvidia will forecast over 70% revenue growth for the current quarter. Options markets imply a potential 10% stock move post-earnings. Nvidia shares have surged 160% year-to-date and 1,000% since October 2022.

Commodities Decline                                                                                                                                                  Global commodities weakened on Wednesday. Oil, gold, and metals prices fell, with rising Chinese inventories pressuring demand. Mining stocks like Anglo American, Rio Tinto, and Glencore declined as a result.

Buffett Reduces Bank of America Stake                                                                                                                    Warren Buffett's Berkshire Hathaway sold an additional $982 million of Bank of America stock, continuing to trim its position. The total stake reduction is now nearly 13% since mid-July, though Berkshire remains the bank's largest shareholder.

Turkish Lira Volatility                                                                                                                                                   Turkey's lira experienced a brief, sharp drop in early trading before stabilizing. The currency weakened 1.4% to a record low against the dollar before recovering, puzzling traders.

Labor Market Perceptions                                                                                                                                           The Conference Board's Labor Differential Index, measuring job market sentiment, remains positive but is trending downward. This aligns with declining quit rates, suggesting worsening perceptions of job availability and potentially signaling softening employment expectations.

Daily analysis 08/28/2024

28. 8. 2024 - Josef Brynda

Latest news

• Nvidia's earnings release is considered the most important event of the Q2 earnings season.
• The Australian dollar has erased its year-to-date losses due to interest rate divergence.
• The drop in crude oil prices is cushioned by supply disruptions in Libya and a decrease in US stocks.
• The yield on two-year US Treasuries is at its lowest in two years.
• Asian stocks are falling ahead of Nvidia's earnings release.
• US consumer confidence in August rose above expectations.
• The ECB is waiting for more data before deciding on interest rates.
• Australian inflation slightly decreased but remains above the central bank's target.
• European bond yields are rising, while US bonds ended mixed.
• Oil prices fell due to technical reasons but stabilized after reports of declining US inventories.
• The US dollar strengthened overnight.
• The British pound reached a more than two-year high against the dollar.
• The Canadian dollar strengthened for the third consecutive day despite falling oil prices.
• Chinese companies are cautious in their outlooks, affecting Hong Kong stocks.
• Warren Buffett sold more Bank of America shares.
• Donald Trump faces a revised indictment in the election subversion case.
• Futures indicate a flat opening in Europe and the US.
• Gold prices hold above $2500 but failed to reach a new record.
• Chicago corn, soybean, and wheat prices rose due to hot weather in the US.
• Aluminum prices fell from their highest level since mid-June.
• The US 5-year Treasury auction is scheduled for today.
• Salesforce and CrowdStrike are among other important earnings releases today.
• ECB members Lane and Knot emphasized the need for more data to confirm inflation's path.
• UK Gilt yields surged due to concerns over higher-than-expected debt issuance.

News summary

• The global financial markets are experiencing significant movements across various asset classes, driven by a combination of economic data, central bank policies, and geopolitical events. This complex interplay is likely to have substantial impacts on major currencies in the coming days and weeks.
• The U.S. dollar has shown strength overnight, despite the yield on two-year U.S. Treasuries reaching its lowest point in two years. This paradoxical movement may be attributed to the rise in U.S. consumer confidence in August, which exceeded expectations. However, the upcoming Nvidia earnings release, considered the most crucial event of the Q2 earnings season, could significantly influence market sentiment and, by extension, the dollar's performance. If Nvidia's results surpass expectations, it could boost risk appetite and potentially weaken the dollar against other major currencies.
• The euro is facing a period of uncertainty as the European Central Bank (ECB) awaits more data before making decisions on interest rates. ECB members Lane and Knot have emphasized the need for additional information to confirm the inflation trajectory. This cautious approach, coupled with rising European bond yields, suggests the euro may experience some volatility in the short term. The currency's direction will likely depend on forthcoming economic data and the ECB's subsequent policy decisions.The British pound has reached a more than two-year high against the dollar, demonstrating remarkable strength. This appreciation comes despite concerns over higher-than-expected debt issuance in the UK, which has caused UK Gilt yields to surge. The pound's resilience may be tested in the coming weeks as the market digests these conflicting signals.
• The Australian dollar has erased its year-to-date losses, benefiting from interest rate divergence. While Australian inflation has slightly decreased, it remains above the central bank's target. This situation suggests that the Reserve Bank of Australia may maintain a relatively hawkish stance, potentially supporting further gains for the Australian dollar against its major counterparts.
• The Canadian dollar has strengthened for the third consecutive day, despite falling oil prices. This resilience is noteworthy, given Canada's status as a major oil exporter. The loonie's strength may be attributed to broader economic factors and could continue if global risk appetite improves.
• In the commodities market, gold prices are holding above $2500 but have failed to reach a new record. This stability in gold prices, combined with the recent strength in the U.S. dollar, suggests that investors are cautiously optimistic about global economic conditions.Looking ahead, several factors could influence currency movements. These include the outcome of the U.S. 5-year Treasury auction, earnings releases from major companies like Salesforce and CrowdStrike, and ongoing geopolitical developments such as Donald Trump's revised indictment in the election subversion case.

5 Things You Need to Know to Start Your Day: Americas

27. 8. 2024 - Josef Brynda

Markets Await Key Data and Earnings
Stocks showed minimal movement as investors await Nvidia earnings and US inflation data later this week. US equity futures edged higher, while European and UK stocks rose, led by mining stocks. Trading volumes remained low across European markets.

Oil Outlook Sours as Banks Lower Forecasts
Goldman Sachs and Morgan Stanley have reduced their oil price forecasts for 2025, expecting Brent crude to average below $80 a barrel. Both banks predict a surplus in the crude market, with prices trending lower over the next 12 months. OPEC+ decisions may aim to discipline non-OPEC supply.

Chinese Economy Concerns Grow
PDD Holdings, owner of Temu, surprised investors with a gloomy outlook, citing inevitable declines in revenue and profits as economic growth slows. This adds to growing concerns about the health of the Chinese economy.

Skydance Media Set to Acquire Paramount Global
David Ellison's Skydance Media is poised to become the new owner of Paramount Global, ending a dramatic acquisition contest. The deal is expected to complete in the first half of 2025.

US Office Values Plunge in Central Business Districts
Office values in US central business districts have dropped 52% from their peaks, with major cities like San Francisco and Manhattan experiencing significant declines. However, suburban areas are faring better, with only an 18% drop nationally.

Fed Rate Cuts: Impact on Borrowing Costs
While the Fed is likely to start cutting rates in September, the impact on long-term borrowing costs remains uncertain. Long-term rates depend on market expectations of future inflation and economic conditions, not just on the Fed's immediate actions.

Daily analysis 08/27/2024

27. 8. 2024 - Josef Brynda

Latest news

• The yen weakened 0.1% to 144.65 per dollar, after reaching a three-week high of 143.45 in the previous session.
• The euro and sterling both rose about 0.1%, trading near recent multi-month highs against the dollar.
• Canadian dollar outperforms major currencies, riding on crude oil gains.
• The U.S. dollar traded largely unchanged in early European trade Tuesday, supported by geopolitical tensions but remaining near recent lows due to expectations of Fed rate cuts
• Markets are now pricing in more rate cuts from the Fed by year-end compared to the Bank of England, which could provide support for sterling
• Most currencies held near milestone highs while the dollar index dipped 0.03% to 100.82, close to a 13-month low.
• The Australian and New Zealand dollars gained, trading near recent highs against the U.S. dollar.
• Canada plans to impose a 100% tariff on Chinese EVs, including Tesla.
• BHP reports 2% rise in annual profit, open to higher debt for acquisitions.
• China's export curbs on semiconductor materials stoke chip production fears.
• Massive fires in Brazil expected to hurt sugar output from the top supplier.
• Libyan rival government to stop oil production over bank dispute, impacting supply.
• Uncertainty looms over Russian gas supplies to Europe via Ukraine.
• PDD shares plummeted 29% after weak Q2 revenue and muted outlook.
• U.S. and European equity futures indicate a flat open.
• Japanese equities up 0.6%, pushing into gains for the week.
• U.S. Treasuries soften ahead of supply surge, yields edge up slightly.
• Oil prices surge on Middle East tensions and Libyan supply risks.
• Gold fails to reach new high, facing profit-taking pressure.
• Sugar futures up 8% in three sessions due to Brazilian fires.
• U.S. consumer confidence data expected, potentially impacting markets.
• Expectations of imminent U.S. rate cuts continued to pressure the dollar, though currencies remained mostly rangebound due to lack of major news in the Asian session.

News summary

• The USD is facing significant downward pressure due to expectations of imminent Federal Reserve rate cuts. Fed officials, including San Francisco President Mary Daly, have signaled that policy adjustments are on the horizon, though the exact magnitude remains uncertain. The dollar index is trading near 13-month lows, and this weakness could persist or even intensify if economic data disappoints or geopolitical tensions ease. The upcoming U.S. consumer confidence data and Treasury auctions could further influence the dollar's trajectory.
• The Euro may see modest gains against the dollar despite economic challenges in the Eurozone. Germany's Ifo survey indicated economic gloom, with the current assessment at its lowest levels since July 2020. However, the euro remains resilient, possibly due to the dollar's broader weakness. ECB rate cut expectations are stable, which could provide some support for the currency. The upcoming German GfK Consumer Sentiment data may offer additional insights into the euro's near-term direction.
• The Canadian Dollar is outperforming major currencies, benefiting significantly from surging oil prices. The closure of oil fields in Libya and heightened Middle East tensions have pushed Brent crude above USD 81, supporting the commodity-linked loonie. This trend could continue if geopolitical risks persist, potentially leading to further strengthening of the Canadian dollar against its counterparts.
• The British Pound is showing strength, trading near multi-month highs against the dollar. The Bank of England's relatively hawkish stance compared to the Fed could provide continued support for sterling. The pound's performance has been notable, outperforming even in the face of broader economic concerns.
• The NZD and AUD experienced losses on Monday but could potentially recover if the U.S. dollar continues to weaken. Their performance may be influenced by commodity prices and overall risk sentiment. The surge in sugar futures due to fires in Brazil and concerns over chip production stemming from China's export curbs could indirectly impact these currencies.
• The NZD paused its rally at $0.6773, retreating from its 2024 high of $0.6798, as markets await key domestic inflation data. The upcoming July report is expected to show a slowdown to 3.4%, with forecasts ranging from 2.7% to 3.7%, due to government rebates on electricity bills. Westpac revised its inflation forecast up to 3.4%, predicting the rebates’ full impact will be seen in August and September. The Reserve Bank of Australia may face pressure to ease policy by November, with markets pricing in a rate cut by year-end. Meanwhile, the New Zealand dollar slipped to $0.6198 after overnight losses
• The weakness in the U.S. dollar is emerging as a central theme, potentially benefiting other major currencies. Commodity-linked currencies, particularly the Canadian dollar, may see additional support from rising oil prices and geopolitical tensions affecting supply. Traders should closely monitor upcoming economic events, including U.S. consumer confidence data and Treasury auctions, as well as any developments in global trade tensions and geopolitical situations for potential impacts on currency valuations.

The Difference Between Fundamental and Sentiment Analysis

26. 8. 2024 - Josef Brynda

Fundamental Analysis

Fundamental analysis focuses on examining the intrinsic value of an asset based on economic and financial factors. Key aspects include:

• Analyzing a country's economic strength
• Evaluating political and social situations
• Examining economic indicators and financial statements
• Assessing industry trends and company performance

The goal of fundamental analysis is to determine the underlying value of an asset and identify if it's overvalued or undervalued

Sentiment Analysis

Sentiment analysis, also known as market sentiment analysis, focuses on gauging the overall attitude and emotions of market participants. It involves:

• Analyzing how traders might react to news or economic releases
• Assessing the market's "feel" or mood about a particular asset or pair
• Using indicators of market psychology and trader opinions
• Incorporating the general opinion of events that may impact price

Sentiment analysis aims to understand the collective psychology driving market movements, often in the short term.