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.

Daily analysis 08/26/2024

26. 8. 2024 - Josef Brynda

Latest news

• Powell signals September rate cut at Jackson Hole conference. Markets now expect at least a 25bps cut, with possibility of 50bps.
• ECB expected to cut rates by less than 25bps in September. Euro movements likely tied to USD fluctuations.
• Euro remains resilient despite poor German PMI. ECB still more concerned about inflation than growth.
• CFTC data shows massive US dollar selling, suggesting possible short-term consolidation
• Euro and sterling longs increase, while CHF sees added short positions
• FX Scorecard indicates sustained bearish momentum for US dollar.
• Bank of Japan's Ueda suggests potential rate hike if economic conditions improve.
• Nvidia earnings report expected Wednesday, projecting 113% YoY revenue growth.
• US Treasuries surge after Powell's dovish comments, 2-year yield drops 9bps.
• Crude oil prices rise due to Middle East tensions, Brent nears USD 80.
• Gold pushes higher following Fed's shift towards rate cuts.
• Equities start week quietly after strong gains, focus on Nvidia earnings.
• European and UK bond yields drop on expectations of rate cuts.
• US dollar weakens in Asia following Powell's dovish message.
• Soybeans attempt bounce as traders monitor US Midwest heatwave.
• German IFO data in focus as manufacturing sector remains weak.
• Nvidia earnings crucial for risk sentiment and potential US dollar movement.
• NZD and SEK outperform on soft-landing hopes, while AUD and CAD underperform.
• Silver outperforms gold in commodity markets.
• JPY and NZD maintain bullish momentum.
• CFTC data shows US dollar net long positioning at lowest since March 2024.

News summary

• Federal Reserve Chair Jerome Powell's speech at the Jackson Hole conference has significantly impacted financial markets. Powell signaled a potential rate cut in September, with markets now pricing in at least a 25 basis point reduction and even considering the possibility of a 50 basis point cut. This dovish stance has led to a surge in US Treasuries, with the 2-year yield dropping 9 basis points. The US dollar has weakened considerably, with CFTC data showing massive selling and net long positioning at its lowest since March 2024.
• In contrast, the European Central Bank (ECB) is expected to be more cautious, with less than a 25 basis point cut anticipated in September. The euro has shown resilience despite poor German PMI data, as the ECB remains more focused on inflation concerns than growth issues. The Bank of Japan has taken a different approach, with Governor Ueda suggesting a potential rate hike if economic conditions improve.
• In the commodity markets, crude oil prices have risen due to Middle East tensions, with Brent approaching $80 per barrel. Gold has also pushed higher following the Fed's shift towards rate cuts, while silver has outperformed gold. Agricultural commodities are seeing movement, with soybeans attempting a bounce as traders monitor a heatwave in the US Midwest.
• Based on these developments, we can expect continued weakness in the US dollar across major currency pairs. The EUR/USD pair is likely to maintain its upward trajectory, potentially testing higher levels if the ECB remains relatively hawkish compared to the Fed. However, the euro's gains may be limited by ongoing concerns about European economic growth, particularly in Germany.
• The Japanese yen (JPY) could see significant strength due to the combination of a dovish Fed, potential BOJ hawkishness, and its safe-haven status amid geopolitical tensions. The CAD may underperform other commodity currencies due to the Bank of Canada's more aggressive rate cut expectations.
• The NZD is likely to continue outperforming on soft-landing hopes, while the Australian dollar (AUD) may face headwinds due to concerns about Chinese economic growth.
• Traders should closely monitor upcoming events, particularly Nvidia's earnings report and German IFO data, as these could significantly impact risk sentiment and currency movements. Additionally, any escalation in Middle East tensions could drive further safe-haven flows.
• Overall, the forex market is poised for increased volatility as central bank policies diverge and economic data continues to shape expectations for future rate movements.

What It Would Take for the U.S. Dollar To Collapse

23. 8. 2024 - Josef Brynda

Imagine waking up to a world where the U.S. dollar (USD), the bedrock of global finance, has collapsed. This scenario may seem far-fetched, but it's a narrative often found on dubious platforms pushing gold, crypto, and extremist political views, and it occasionally creeps into mainstream discourse. The greenback has always had its external foes during the long period of its dominance—from the communist bloc and anti-colonialists to contemporary adversaries like China, Russia, and other emerging powers. Meanwhile, critics argue that mounting inflation, the rising U.S. federal deficit, and government entitlements could bring down the USD's dominance from within.

Daily analysis 08/23/2024

23. 8. 2024 - Josef Brynda

Latest news

• Futures are pointing to a positive opening. Focus on Powell's speech.
• Gold dips, crude struggles near support and wheat tanks.
• European and U.S. bond yields rise amid strong PMI data.
• Fed Officials Argue for Gradual Pace of Cuts Starting Soon.
• US S&P Global Flash Manufacturing PMI surprisingly declined to 48.0, while Services rose to 55.2.
• Eurozone PMI exhibited similar trends with manufacturing weaker at 45.6 in August from 45.8.
• UK PMI offered more good news for the economy with growth remaining strong while price pressures are slowing.
• Intuit reported better-than-expected earnings results and announced guidance above consensus.
• Japanese equities are up despite hawkish comments from BOJ Ueda.
• European sovereign markets fell on Thursday as stronger-than-expected euro-area PMI figures led to a reduction in expectations for rate cuts from the ECB.
• The Bloomberg Commodity Total Return Index trades flat on the week.
• Crude oil is heading for a weekly loss as falling product prices point to soft demand.
• The US dollar snapped four days of losses to reverse higher as US economic data continued to rule out the case for a larger rate cut from the Fed.
• Kansas Fed President Schmid wants more data before supporting rate cuts.
• Boston Fed's Susan Collins said rate cuts should be 'gradual and methodical'
• US jobless claims came in as expected, while manufacturing activity slowed more than anticipated
• EURUSD found support near 1.11 but could weaken if Powell confirms gradual rate cuts.
• UK economy has been performing better than major peers, benefiting the pound
• US crude rebounded near the $72pb level on hopes of rate cuts boosting global oil demand.
• Powell's speech could bring last-minute volatility to an otherwise calm week.

News summary

• The financial markets are currently in a state of anticipation as investors await Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium. Recent economic data and statements from Fed officials have painted a complex picture, influencing various asset classes and currencies.
• U.S. economic indicators have been mixed, with manufacturing PMI declining unexpectedly while services PMI rose. Jobless claims came in as expected, but manufacturing activity slowed more than anticipated. These conflicting signals have led to uncertainty regarding the Fed's future rate decisions. However, if the markets interpret this data as a sign of economic slowdown, it could lead to a weakening of the dollar
• The pound has been performing well due to the UK's relatively strong economic performance. It may continue to show resilience against other major currencies.
•  With crude oil heading for a weekly loss due to soft demand, the CAD might face some headwinds. However, its performance will also depend on the overall USD trend.
• Markets are now pricing in a 76% chance of the Fed cutting rates by 25 basis points (bps) at its September meeting, the CME FedWatch tool showed, with traders backing away from bets on a big 50 bps cut.
• British consumer confidence held at an almost three-year high in August, bolstered by improving sentiment around personal finances and major purchases, according to a survey that added to positive signals in the wider economy.
• The euro and sterling are trading near 13-month highs against the dollar, indicating relative strength in these currencies compared to the greenback.
• In the very short term, the dollar may see some strength, especially if Powell's speech is perceived as less dovish than expected anf for example, this suggests that the services sector is not slowing down. However, over the medium to long term, the dollar is likely to face gradual downward pressure as the market anticipates and then experiences the beginning of a rate cut cycle. The pace of this decline will depend on the Fed's actual policy decisions, incoming economic data, and global economic conditions.