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.

The impact of Federal Resrve Interest Rate Change

22. 8. 2024 - Josef Brynda

Why does the Federal Reserve cut interest rates when the economy begins to struggle? The theory is that by cutting rates, borrowing costs decrease, and this prompts businesses to take out loans to hire more people and expand production. The logic works in reverse when the economy is hot.

When interest rates change, there are real-world effects on the ways that consumers and businesses can access credit to make necessary purchases and plan their finances. It even affects some life insurance policies.

Here, we take a look at the impact on various parts of the economy when the Fed changes interest rates, from lending and borrowing to consumer spending to the stock market. This article explores how consumers pay more for the capital required to make purchases and why businesses will face higher costs tied to expanding their operations and funding payrolls when the Fed changes rates. But the preceding entities are not the only ones that suffer due to higher costs, as this article explains.

Daily analysis 08/22/2024

22. 8. 2024 - Josef Brynda

Latest news

• US employment falls by 818,000 in latest government revision
• Fed minutes point to 'likely' rate cut coming in September
• Zoom lifts revenue forecast on growing demand for AI tools
• Ford is pulling back on EV spending
• FOMC July minutes suggest potential rate cut in September
• BLS payrolls revised lower by 818,000, the biggest downward revision since 2009
• Markets remain sensitive to incoming labor market data
• Target shares rose 10% after lifting profit outlook
• Snowflake shares fell 8% in extended trading
• Agilent Technologies' shares rose 2% in extended trading
• Bavarian Nordic in focus after beating Q2 estimates
• U.S. Treasuries rallied after payroll revision news
• Strong demand in 20-year U.S. Treasury auction
• German yield curve bull steepened
• UK gilt gains focused in mid-curve
• Gold trades near USD 2,500, showing signs of exhaustion
• Silver outperforms gold but yet to challenge USD 30
• Crude trades near key support levels
• US natural gas futures trade lower ahead of weekly storage report
• Sterling rises against euro following weak French and German manufacturing PMI data
• Dollar recovers marginally after hitting near eight-month low
• Bank of Japan could raise interest rates to 0.5% as soon as October
• Eurozone composite PMI rises to 51.2 in August, beating expectations
• Eurozone bond yields edge higher following PMI data
• Focus on upcoming eurozone, UK, and US PMI data
• Fed Chair Powell's speech on Friday is highly anticipated
• Investors expect potential rate cuts following FOMC minutes and payroll revision

News summary

• Based on these developments, the U.S. dollar is likely to face downward pressure due to the significant downward revision in employment figures and the Federal Reserve's hints at a potential rate cut in September. However, the dollar has shown a marginal recovery after hitting a near eight-month low. The euro may see mixed movements, with positive factors including the better-than-expected Eurozone composite PMI, while negative influences come from weak French and German manufacturing PMI data. A slight support might come from Eurozone bond yields edging higher.
• The Canadian dollar's movement might be influenced by crude oil trading near key support levels, as Canada is a major oil exporter. Its movement will also be closely linked to the general trend of the USD. Sterling could see some strength, as it has risen against the euro following weak French and German manufacturing PMI data. Additional support might come from UK gilt gains focused in the mid-curve.
• Fed Chair Powell's speech on Friday is highly anticipated and could cause significant forex market reactions. Investors' expectations of potential rate cuts following FOMC minutes and payroll revision may lead to further dollar weakness.
• The latest economic data and market developments paint a complex picture. U.S. employment figures were revised downward by 818,000, marking the largest revision since 2009. Federal Reserve minutes suggest a potential rate cut in September. Zoom raised its revenue forecast due to growing demand for AI tools, while Ford is reducing its spending on electric vehicles. Target shares rose 10% after improving its profit outlook, while Snowflake shares fell 8% in extended trading. U.S. Treasuries rallied following the payroll revision news. Gold is trading near $2,500, showing signs of exhaustion, while silver outperforms but hasn't yet challenged $30. The Bank of Japan might raise interest rates to 0.5% as early as October. Eurozone's composite PMI rose to 51.2 in August, surpassing expectations.

Dollar hits year low versus euro as traders await data and Powell

21. 8. 2024 - Josef Brynda

The dollar edged higher on Wednesday after falling to its lowest level against the euro this year as investors waited for revisions to U.S. employment data and a speech by Federal Reserve Chair Jerome Powell.

The euro climbed EURUSD to $1.1132, the highest since December, as investors increased their bets on Fed rate cuts this year, dragging down U.S. bond yields and weighing on the dollar. It was last down 0.1% at $1.1119 as the dollar found a footing.

Daily analysis 08/21/2024

21. 8. 2024 - Josef Brynda

Latest news

• Recent Dollar Weakness and Market Expectations
• The "Dollar Smile" Theory and Current Market Positioning
• Fed Chair Powell's speech at Jackson Hole will be closely watched by forex traders.
• Upcoming economic data releases will be crucial for forex traders
• Potential for Dollar Rebound and Impact on Other Currencies
• Gold Hits New Record High as Dollar Weakens and Rate Cut Expectations Grow
• US Dollar Index Hits Year-to-Date Lows Below 102
• Gold Surges to Record High of $2,531 Amid Global Economic Concerns
• Canadian Inflation Cools to 2.5% YoY, Boosting Rate Cut Expectations
• Crude Oil Prices Decline on Chinese Demand Worries and Gaza Ceasefire Hope
• Swedish Krona Gains Despite Riksbank's Dovish 25bps Rate Cut
• RBA Minutes Reveal Cautious Stance on Interest Rates
• Wall Street Closes Lower in Volatile Trading Session
• Treasury Yields Fall on Weak Employment Data and Dovish Canadian Inflation
• Major Currencies Mixed as Markets Await Jackson Hole Symposium
• Fed Chair Powell's Jackson Hole Speech in Focus Amid Rate Cut Speculations

News summary

• The US Dollar Index has fallen below 102, reaching year-to-date lows. This weakness is driven by changing market expectations for the Federal Reserve's interest rate path and concerns about the US economic outlook. Markets anticipate a dovish stance from Fed Chair Jerome Powell at the upcoming Jackson Hole Symposium, with expectations of a more accommodative monetary policy. Additionally, potential revisions to US payroll data and political shifts are contributing to the dollar's decline. While there's potential for a short-term rebound if market expectations for Fed rate cuts prove excessive, the overall trend remains bearish for the USD.
• Dollar Firms After Three-Day Decline Ahead of Key Economic Events
  The US dollar trades slightly higher following a three-day decline that took it to a year-low. Markets are settling ahead of crucial events, including PMIs and Fed Chair Powell's speech at Jackson Hole symposium
• Gold reached a fresh record high of $2,531, driven by global debt concerns, central bank reserves shifting to gold, and expectations of a US rate-cutting cycle. Silver outperforms due to recovering industrial metal sector, with copper holding above $4.2.
• Canadian Inflation Slows, Reinforcing Rate Cut Expectations
  Canada's July inflation slowed to 2.5% YoY, with core measures also cooling. This signals the Bank of Canada can maintain its rate-cutting path, with markets expecting three more cuts this year.
• Crude Oil Prices Fall on Chinese Demand Concerns and Gaza Ceasefire Hopes
  Oil prices continue to decline due to worries about Chinese demand, as apparent oil demand fell 8.8% y/y in July. Increased hopes for a Gaza ceasefire also contribute to bearish sentiment. 
• The Swedish krona strengthened despite a dovish 25bps rate cut by the Riksbank. Markets have fully priced in the extent of easing from Sweden's central bank, with two to three more cuts expected this year.
• The Reserve Bank of Australia's August meeting minutes showed discussions on further tightening, but a stronger case for maintaining the cash rate at 4.35%. The board consensus favors holding rates high for an extended period.
• US Equities Close Lower Amid Volatility and Mixed Corporate News
  Wall Street traded slightly lower in a volatile session, with energy and material stocks declining while health and consumer staples gained. Notable corporate news included Lowe's missing revenue expectations and Boeing grounding its 777x test fleet.
• Treasury Yields Fall on Weak Employment Data and Dovish Canadian Inflation
  US Treasuries rallied on weak Philadelphia Fed employment data and softer Canadian inflation, boosting expectations for potential rate cuts. The 10-year yield ended around 3.81%, with the 2-year yield dipping below 4%.
• Major Currencies Mixed Against Dollar as Markets Await Key Events
  The British pound and Euro rose against the dollar, while the Japanese yen and Australian dollar weakened. Markets are cautious ahead of the Jackson Hole symposium and the release of FOMC minutes.
• Short-term rebound potential: If market expectations for Fed rate cuts prove excessive, there could be a short-term dollar rebound. Overall, while there's potential for short-term fluctuations, the prevailing trend and market sentiment suggest continued pressure on the US dollar, at least until there's a significant shift in economic data or Fed policy stance.

Daily analysis 08/19/2024

19. 8. 2024 - Josef Brynda

Latest news

• Equities Start Week on Muted Note
• Yen Surges 1% as Strength Rally Continues
• Gold Reaches Record High, Hitting $2500 Target
• U.S. Treasuries Dip Following Strong Consumer Sentiment Data
• University of Michigan Consumer Sentiment Beats Expectations
• UK Retail Sales Rebound in July
• Preliminary August PMI Figures Awaited for Europe and US
• Fed's Powell to Set Stage for Rate Cuts at Jackson Hole
• Chicago Fed President Goolsbee Reiterates Cautious Tone
• Markets Positioned for September Fed Rate Cut
• Copper Holds Gains Despite End to Chile Strike
• Crude Oil Steady Amid Gaza Peace Talks and China Demand Concerns
• Dollar Index Hits Seven-Month Low
• Sterling and Australian Dollar Gain on Easing Expectations
• Euro Touches Highest Level of 2024 Amid Dollar Weakness
• Australian and New Zealand Dollars Hit One-Month Highs
• Analysts Eye Potential for Further Euro Gains if EUR/USD Breaks 1.11 Level
• M&A Activity Potentially Boosting Demand for Sterling

News summary

• The overall sentiment appears bearish for the US dollar. Several factors point to potential dollar weakness. The Dollar Index hitting a seven-month low indicates broad-based dollar weakness. Fed's Powell is expected to set the stage for rate cuts at Jackson Hole, which typically weakens the dollar. Markets are positioned for a September Fed rate cut, further pressuring the dollar. Strong consumer sentiment data has not been enough to boost the dollar significantly.
• The euro touching its highest level of 2024 suggests continued strength. If EUR/USD breaks above 1.11, further gains are possible. Prediction: EUR/USD likely to test 1.12-1.13 levels in the near term.
• Sterling gains on UK retail sales rebound and easing expectations. M&A activity potentially boosting demand for the pound.
• The Bank of England is seen as potentially more hawkish than the ECB. Markets are positioning for potential rate cuts from both central banks, but the timing and pace may differ.
• Australian and New Zealand Dollars Hit One-Month Highs. The strength in commodity-linked currencies reflects improved risk sentiment and potentially better global growth prospects.
• The forex market appears to be in a risk-on mode, with commodity currencies and the euro gaining against the dollar. The upcoming Jackson Hole symposium and PMI data releases will be crucial in determining near-term trends. The dollar's weakness may persist if the Fed maintains a dovish stance and global economic data improves.
• Traders should watch for any shifts in Fed rhetoric or unexpected economic data that could alter these predictions. The ongoing geopolitical situations, such as Gaza peace talks and China's economic performance, could also influence currency movements, particularly for commodity-linked currencies.

Daily analysis 08/13/2024

13. 8. 2024 - Josef Brynda

Latest news

• Japanese equities gain 3% as the market rebounds following a national holiday
• Focus on Pandora, which reported better-than-expected Q2 results and raised its 2024 revenue guidance
• Home Depot exceeds quarterly expectations but warns of weaker sales in the latter half of the year due to high interest rates and consumer uncertainty
• The US dollar remains range-bound ahead of the US inflation report scheduled for tomorrow
• The New Zealand dollar outperforms, anticipating the Reserve Bank of New Zealand's rate decision
• The Japanese yen and Swiss franc show mixed performance amid geopolitical risks
• Crude oil prices are rising due to potential geopolitical tensions, including a possible large Iranian attack on Israel.
• WTI crude oil increased by 4.2% to $80.06, while Brent crude rose by 3.3% to $82.3.
• Gold prices are also up by 1.71% as US Treasury yields decline ahead of crucial CPI data
• Bond markets are steady as investors await key economic data and monitor geopolitical tensions.
• European bond markets have shown little change, with the German 10-year yield flat at 2.23%.
• US Treasury yields have fallen, driven by a risk-off sentiment as investors seek safety amid geopolitical concerns.
• The Germany August ZEW survey is estimated at 34.0, down from 41.8 previously.
• The US July PPI Final Demand YoY is estimated at 2.3%, down from 2.6% prior.
• Key macro events include the eurozone ZEW survey and US PPI data, with the US CPI report due tomorrow.

News summary

• The current financial landscape is significantly influenced by various factors, including economic data releases, corporate earnings, and geopolitical tensions. These elements are expected to impact the forex market, particularly the USD and EUR.
• The USD is currently range-bound as markets anticipate the upcoming US inflation report. The outcome of this report is crucial as it will provide insights into the Federal Reserve's future monetary policy decisions. If the inflation data indicates a cooling trend, it may support expectations for potential interest rate cuts, which could weaken the USD. Conversely, if inflation remains high, it could reinforce expectations for tighter monetary policy, potentially strengthening the USD. Additionally, geopolitical tensions, such as the potential Iranian attack on Israel, could drive safe-haven demand for the USD, adding upward pressure.
• The EUR is influenced by both regional economic indicators and broader market sentiment. The recent decline in the Germany August ZEW survey suggests a deteriorating economic outlook, which might weigh on the EUR. However, if the US PPI data signals a cooling US economy, it could reduce the USD's attractiveness, potentially providing some support to the EUR. Moreover, geopolitical risks could lead to increased volatility, affecting the EUR's performance against other currencies.
• The EUR's movement will also depend on the eurozone's economic resilience and the European Central Bank's policy stance in response to economic challenges.In the forex market, the mixed performance of currencies like the Japanese yen and Swiss franc amid geopolitical risks highlights the complexity of currency movements. Safe-haven currencies may experience increased demand if geopolitical tensions escalate, leading to potential appreciation. Meanwhile, the New Zealand dollar's outperformance reflects market expectations of the Reserve Bank of New Zealand's rate decision, showcasing how monetary policy expectations can drive currency movements.
• Overall, the forex market is poised for potential volatility as traders react to economic data releases and geopolitical developments. The interplay between these factors will shape the trajectories of major currencies like the USD and EUR, influencing trading strategies and economic forecasts.

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

13. 8. 2024 - Josef Brynda

Futures Bounce: US stock futures are recovering as markets regain ground after recent losses. European and Asian stocks are also rising. Treasuries and the dollar remain stable ahead of key inflation data and Home Depot's earnings report.

Japan Stock Recovery: The Nikkei 225 index in Japan has bounced back from its recent sharp decline, with investors focusing on fundamentals and taking advantage of low valuations.

Chinese Market Intervention: Chinese authorities are tightening control over the local bond market, with interventions to cool down market activity. Meanwhile, Chinese stock trading is declining, and MSCI is reducing Chinese stocks in its benchmarks.

Oil Prices Slip: Oil prices are falling after a five-day increase, due to concerns about weakening global demand. OPEC has cut its demand forecasts, overshadowing geopolitical tensions in the Middle East.

Valuing Assets at B. Riley Financial: B. Riley Financial is struggling to value its assets amid accounting concerns and a federal investigation, leading to a significant drop in its stock and suspension of its dividend.

Consumer Inflation Expectations Decline: Recent data shows that inflation expectations among consumers are decreasing, indicating that fears of sustained high inflation may be subsiding. The 3-year inflation expectation has hit its lowest level in the survey's history.