Daily Market Comment â Investors lock gaze on Fed decision
- Fed expected to hike, spotlight to fall on hints about next moves
- Euro awaits ECB; aussie slides on inflation slowdown
- Wall Street gains, awaits Fed and more tech earnings
The US dollar traded lower against most of the other currencies on Tuesday, but it seems to be stabilizing today as investors may have turned to a more cautious trading strategy ahead of the FOMC decision later today.
A 25bps hike is a done deal in the eyes of investors, but the financial community appears to be split on whether another hike could be delivered before the end credits of this tightening crusade roll. With inflation slowing more than expected in June, they are also anticipating a series of rate cuts throughout 2024. Specifically, they are seeing interest rates ending next year almost 90bps below current levels.
Having all that in mind, a 25bps hike is unlikely to trigger volatility on its own. Investors may focus on whether the statement will hint at more rate hikes and whether Fed Chair Powell will once again push back on interest rate cuts as he did last time. With core inflation more than double the Fedâs 2% objective, signaling the end so early may be an unwise choice. Thus, officials may reiterate the view that the fight against inflation is not over, while at the press conference, Powell could reiterate the view that rate cuts are âa couple of years out.â
However, it remains to be seen whether another round of hawkish rhetoric will be enough to convince market participants to scale back their rate cut bets, as some of them may be holding the view that prior hikes could still work in bringing inflation further down in the coming months.
If Powell and co fail again to hammer home their message, the dollar could slide, while the opposite may be true if investors realize that the Fed has no intention to stop raising rates now and that rate reductions are not on next yearâs agenda.
Is it time for the ECB to adopt a more cautious stance?Euro/dollar could fall below the key support zone of 1.1010, marked by the inside swing high of June 22, but whether it could head decently lower this week may also depend on the outcome of the ECB decision tomorrow.
A 25bps increase seems to be set in stone, but with several ECB policymakers arguing that a September hike is not a done deal and Mondayâs PMIs revealing a sharp slowdown in business activity, investors have well changed their minds with regards to the Bankâs future course of action.
They still see decent chances of another hike being delivered by December, but they have raised bets of rate reductions during 2024. A couple of weeks ago no cuts were on the table. Now, they expect interest rates to end next year 25bps below current levels. Thus, the spotlight may fall on ECB President Lagarde as traders are likely eager to find out whether she has also softened her stance or whether she will appear in her hawkish suit again, dismissing the Eurozoneâs economic slowdown and prioritizing getting inflation in check.
Elsewhere, the Australian dollar is todayâs main loser, despite gaining notable ground against its US counterpart yesterday. The slide in the aussie was the result of a larger-than-expected slowdown in Australiaâs quarter-on-quarter CPI, taking the year-on-year rate down to 6% from 7% and raising speculation that the RBA could forgo a rate hike next week.
Wall Street awaits Fed, more earningsAll three of Wall Streetâs main indices ended their Tuesday session in the green, with the tech-heavy Nasdaq gaining the most ground amid excitement about artificial intelligence (AI) ahead of earnings results from tech giants Alphabet and Microsoft.
Both firms reported after the closing bell, and both beat market expectations. Googleâs parent jumped in after-hours trading, but Microsoft slid on slowing revenue growth in its cloud business.
Today, it is the turn of another member of the âMagnificent 7â group to report after the closing bell, and thatâs Meta Platforms. However, equity investors may start adjusting their positions ahead of the release, driven by the outcome of the Fed decision.
A hawkish Fed could result in some selling on Wall Street, while the opposite may be true if policymakers fail to convince the financial community to accept their âhigher for longerâ mentality.
āĻ¸āĻŽā§āĻĒāĻ°ā§āĻāĻŋāĻ¤ āĻ ā§āĻ¯āĻžāĻ¸ā§āĻ
āĻ¸āĻ°ā§āĻŦāĻļā§āĻˇ āĻāĻŦāĻ°
āĻĻāĻžāĻŦāĻŋāĻ¤ā§āĻ¯āĻžāĻ: XM Group āĻāĻ° āĻ¸āĻ¤ā§āĻ¤ā§āĻŦāĻžāĻā§āĻ˛ā§ āĻļā§āĻ§ā§āĻŽāĻžāĻ¤ā§āĻ° āĻāĻžāĻ°ā§āĻ¯āĻāĻ° āĻ¸ā§āĻŦāĻž āĻĒā§āĻ°āĻĻāĻžāĻ¨ āĻāĻ°ā§ āĻāĻŦāĻ āĻāĻŽāĻžāĻĻā§āĻ° āĻ āĻ¨āĻ˛āĻžāĻāĻ¨ āĻā§āĻ°ā§āĻĄāĻŋāĻ āĻ¸ā§āĻŦāĻŋāĻ§āĻž āĻā§āĻ˛ā§ āĻāĻĒāĻā§āĻ āĻāĻ°āĻ¤ā§ āĻĻā§ā§, āĻ¸ā§āĻāĻ¸āĻžāĻĨā§ āĻāĻāĻāĻ¨ āĻŦā§āĻ¯āĻā§āĻ¤āĻŋāĻā§ āĻāĻ¯āĻŧā§āĻŦāĻ¸āĻžāĻāĻā§ āĻŦāĻž āĻāĻ° āĻŽāĻžāĻ§ā§āĻ¯āĻŽā§ āĻāĻĒāĻ˛āĻŦā§āĻ§ āĻŦāĻŋāĻˇāĻ¯āĻŧāĻŦāĻ¸ā§āĻ¤ā§ āĻĻā§āĻāĻ¤ā§ āĻāĻŦāĻ/āĻ āĻĨāĻŦāĻž āĻŦā§āĻ¯āĻŦāĻšāĻžāĻ° āĻāĻ°āĻžāĻ° āĻ āĻ¨ā§āĻŽāĻ¤āĻŋ āĻĻā§ā§ āĻ¤āĻŦā§ āĻāĻāĻŋ āĻā§āĻ¨ āĻĒāĻ°āĻŋāĻŦāĻ°ā§āĻ¤āĻ¨ āĻŦāĻž āĻĒā§āĻ°āĻ¸āĻžāĻ°āĻŋāĻ¤ āĻāĻ°āĻžāĻ° āĻāĻĻā§āĻĻā§āĻļā§āĻ¯ā§ āĻ¨āĻ¯āĻŧ āĻŦāĻž āĻāĻŽāĻ¨ āĻā§āĻ¨ āĻāĻžāĻ°āĻŖā§āĻ āĻ¨āĻ¯āĻŧāĨ¤ āĻāĻ āĻ§āĻ°āĻ¨ā§āĻ° āĻĒā§āĻ°āĻŦā§āĻļ āĻāĻŦāĻ āĻŦā§āĻ¯āĻŦāĻšāĻžāĻ° āĻ¸āĻŦāĻ¸āĻŽāĻ¯āĻŧ āĻāĻŋāĻā§ āĻŦāĻŋāĻˇā§ā§āĻ° āĻ¸āĻžāĻĨā§ āĻā§āĻŋāĻ¤: (i) āĻļāĻ°ā§āĻ¤āĻžāĻŦāĻ˛ā§; (ii) āĻā§āĻāĻāĻŋ āĻ¸āĻ¤āĻ°ā§āĻāĻ¤āĻž; āĻāĻŦāĻ (iii) āĻ¸āĻŽā§āĻĒā§āĻ°ā§āĻŖ āĻĻāĻžāĻŦāĻŋāĻ¤ā§āĻ¯āĻžāĻāĨ¤ āĻāĻ āĻ§āĻ°āĻ¨ā§āĻ° āĻŦāĻŋāĻˇāĻ¯āĻŧāĻŦāĻ¸ā§āĻ¤ā§ āĻ¤āĻžāĻ āĻ¸āĻžāĻ§āĻžāĻ°āĻŖ āĻ¤āĻĨā§āĻ¯ āĻšāĻŋāĻ¸ā§āĻŦā§ āĻāĻžāĻĄāĻŧāĻž āĻāĻ° āĻ āĻ¨ā§āĻ¯ āĻā§āĻ¨ āĻāĻĻā§āĻĻā§āĻļā§āĻ¯ā§ āĻĒā§āĻ°āĻĻāĻžāĻ¨ āĻāĻ°āĻž āĻšāĻ¯āĻŧ āĻ¨āĻžāĨ¤ āĻ āĻ¨ā§āĻā§āĻ°āĻš āĻāĻ°ā§ āĻŦāĻŋāĻļā§āĻˇāĻāĻžāĻŦā§ āĻ¸āĻā§āĻ¤āĻ¨ āĻĨāĻžāĻā§āĻ¨ āĻ¯ā§, āĻāĻŽāĻžāĻĻā§āĻ° āĻ āĻ¨āĻ˛āĻžāĻāĻ¨ āĻā§āĻ°ā§āĻĄāĻŋāĻ āĻ¸ā§āĻŦāĻŋāĻ§āĻžāĻ° āĻŦāĻŋāĻˇāĻ¯āĻŧāĻŦāĻ¸ā§āĻ¤ā§āĻā§ā§āĻ˛ā§ āĻāĻ°ā§āĻĨāĻŋāĻ āĻŦāĻžāĻāĻžāĻ°ā§ āĻā§āĻ¨ā§ āĻ˛ā§āĻ¨āĻĻā§āĻ¨ āĻāĻ°āĻžāĻ° āĻāĻ¨ā§āĻ¯ āĻ āĻ¨ā§āĻ°ā§āĻ§ āĻŦāĻž āĻĒā§āĻ°āĻ¸ā§āĻ¤āĻžāĻŦ āĻ¨āĻ¯āĻŧāĨ¤ āĻāĻžāĻ°āĻŖ āĻ¯ā§āĻā§āĻ¨ā§ āĻāĻ°ā§āĻĨāĻŋāĻ āĻŦāĻžāĻāĻžāĻ°ā§ āĻā§āĻ°ā§āĻĄāĻŋāĻ āĻāĻ°āĻ˛ā§ āĻāĻĒāĻ¨āĻžāĻ° āĻŽā§āĻ˛āĻ§āĻ¨ā§āĻ° āĻ¸āĻžāĻĨā§ āĻāĻāĻāĻŋ āĻāĻ˛ā§āĻ˛ā§āĻāĻ¯ā§āĻā§āĻ¯ āĻā§āĻāĻāĻŋ āĻāĻĄāĻŧāĻŋāĻ¤ āĻĨāĻžāĻāĻŦā§āĨ¤
āĻāĻŽāĻžāĻĻā§āĻ° āĻ āĻ¨āĻ˛āĻžāĻāĻ¨ āĻā§āĻ°ā§āĻĄāĻŋāĻ āĻ¸ā§āĻŦāĻŋāĻ§āĻžāĻ¯āĻŧ āĻĒā§āĻ°āĻāĻžāĻļāĻŋāĻ¤ āĻ¸āĻāĻ˛ āĻŦāĻŋāĻˇā§āĻŦāĻ¸ā§āĻ¤ā§ āĻļā§āĻ§ā§āĻŽāĻžāĻ¤ā§āĻ° āĻļāĻŋāĻā§āĻˇāĻžāĻāĻ¤/āĻ¤āĻĨā§āĻ¯āĻŽā§āĻ˛āĻ āĻāĻĻā§āĻĻā§āĻļā§āĻ¯ā§ āĻ¤ā§āĻ°āĻŋ āĻāĻ°āĻž āĻšāĻ¯āĻŧā§āĻ āĻāĻŦāĻ āĻāĻ¤ā§ āĻāĻ°ā§āĻĨāĻŋāĻ, āĻŦāĻŋāĻ¨āĻŋāĻ¯āĻŧā§āĻ āĻāĻ° āĻŦāĻž āĻā§āĻ°ā§āĻĄāĻŋāĻ āĻĒāĻ°āĻžāĻŽāĻ°ā§āĻļ āĻāĻŦāĻ āĻ¸ā§āĻĒāĻžāĻ°āĻŋāĻļ āĻ§āĻžāĻ°āĻŖ āĻāĻ°āĻž āĻāĻāĻŋāĻ¤ āĻ¨āĻ¯āĻŧ - āĻāĻŽāĻžāĻĻā§āĻ° āĻā§āĻ°ā§āĻĄāĻŋāĻ āĻŽā§āĻ˛ā§āĻ¯ā§āĻ° āĻāĻāĻāĻŋ āĻ°ā§āĻāĻ°ā§āĻĄ; āĻ āĻĨāĻŦāĻž āĻā§āĻ¨ā§ āĻāĻ°ā§āĻĨāĻŋāĻ āĻāĻĒāĻāĻ°āĻŖā§ āĻ˛ā§āĻ¨āĻĻā§āĻ¨ā§āĻ° āĻĒā§āĻ°āĻ¸ā§āĻ¤āĻžāĻŦ, āĻŦāĻž āĻ āĻ¨ā§āĻ°ā§āĻ§; āĻ āĻĨāĻŦāĻž āĻāĻĒāĻ¨āĻžāĻ° āĻāĻžāĻā§ āĻ āĻ¯āĻžāĻāĻŋāĻ¤ āĻāĻ°ā§āĻĨāĻŋāĻ āĻĒā§āĻ°āĻāĻžāĻ° āĻšāĻŋāĻ¸ā§āĻŦā§ āĻāĻāĻŋāĻā§ āĻ§āĻžāĻ°āĻŖ āĻāĻ°āĻž āĻāĻāĻŋāĻ¤ āĻ¨āĻ¯āĻŧāĨ¤
āĻā§āĻ¨ āĻ¤ā§āĻ¤ā§āĻ¯āĻŧ āĻĒāĻā§āĻˇā§āĻ° āĻŦāĻŋāĻˇā§āĻŦāĻ¸ā§āĻ¤ā§, āĻĒāĻžāĻļāĻžāĻĒāĻžāĻļāĻŋ XM āĻĻā§āĻŦāĻžāĻ°āĻž āĻĒā§āĻ°āĻ¸ā§āĻ¤ā§āĻ¤ āĻŦāĻŋāĻˇā§ āĻŦāĻ¸ā§āĻ¤ā§ āĻ¯ā§āĻŽāĻ¨ āĻŽāĻ¤āĻžāĻŽāĻ¤, āĻ¸āĻāĻŦāĻžāĻĻ, āĻāĻŦā§āĻˇāĻŖāĻž, āĻŦāĻŋāĻļā§āĻ˛ā§āĻˇāĻŖ, āĻĻāĻžāĻŽ, āĻ āĻ¨ā§āĻ¯āĻžāĻ¨ā§āĻ¯ āĻ¤āĻĨā§āĻ¯ āĻŦāĻž āĻāĻ āĻāĻ¯āĻŧā§āĻŦāĻ¸āĻžāĻāĻā§ āĻĨāĻžāĻāĻž āĻ¤ā§āĻ¤ā§āĻ¯āĻŧ āĻĒāĻā§āĻˇā§āĻ° āĻ¸āĻžāĻāĻā§āĻ° āĻ˛āĻŋāĻāĻ āĻā§āĻ˛ā§ "āĻ¯ā§āĻŽāĻ¨-āĻ°āĻ¯āĻŧā§āĻā§" āĻāĻŋāĻ¤ā§āĻ¤āĻŋāĻ¤ā§ āĻ¸āĻ°āĻŦāĻ°āĻžāĻš āĻāĻ°āĻž āĻšāĻ¯āĻŧ āĻ¸āĻžāĻ§āĻžāĻ°āĻŖ āĻŽāĻžāĻ°ā§āĻā§āĻā§āĻ° āĻāĻžāĻˇā§āĻ¯ āĻšāĻŋāĻ¸ā§āĻŦā§ āĻāĻŦāĻ āĻŦāĻŋāĻ¨āĻŋāĻ¯āĻŧā§āĻā§āĻ° āĻĒāĻ°āĻžāĻŽāĻ°ā§āĻļ āĻāĻ āĻ¨ āĻāĻ°āĻŦā§āĻ¨ āĻ¨āĻžāĨ¤ āĻ¯ā§āĻā§āĻ¨ā§ āĻŦāĻŋāĻˇāĻ¯āĻŧāĻŦāĻ¸ā§āĻ¤ā§āĻā§ āĻŦāĻŋāĻ¨āĻŋāĻ¯āĻŧā§āĻ āĻāĻŦā§āĻˇāĻŖāĻž āĻšāĻŋāĻ¸ā§āĻŦā§ āĻŦā§āĻāĻžāĻ¨ā§ āĻšāĻ˛ā§, āĻāĻĒāĻ¨āĻžāĻā§ āĻ āĻŦāĻļā§āĻ¯āĻ āĻŽāĻ¨ā§ āĻ°āĻžāĻāĻ¤ā§ āĻšāĻŦā§ āĻāĻŦāĻ āĻ¸ā§āĻŦā§āĻāĻžāĻ° āĻāĻ°āĻ¤ā§ āĻšāĻŦā§ āĻ¯ā§ āĻŦāĻŋāĻˇāĻ¯āĻŧāĻŦāĻ¸ā§āĻ¤ā§āĻāĻŋ āĻŦāĻŋāĻ¨āĻŋāĻ¯āĻŧā§āĻ āĻāĻŦā§āĻˇāĻŖāĻžāĻ° āĻ¸ā§āĻŦāĻžāĻ§ā§āĻ¨āĻ¤āĻžāĻ° āĻĒā§āĻ°āĻāĻžāĻ°ā§āĻ° āĻāĻ¨ā§āĻ¯ āĻĄāĻŋāĻāĻžāĻāĻ¨ āĻāĻ°āĻž āĻāĻāĻ¨āĻŋ āĻĒā§āĻ°āĻ¯āĻŧā§āĻāĻ¨ā§āĻ¯āĻŧāĻ¤āĻž āĻ āĻ¨ā§āĻ¸āĻžāĻ°ā§ āĻ¤ā§āĻ°āĻŋ āĻāĻ°āĻž āĻšāĻ¯āĻŧāĻ¨āĻŋ āĻāĻŦāĻ āĻāĻāĻŋ āĻŦāĻŋāĻŦā§āĻāĻ¨āĻž āĻāĻ°āĻž āĻšāĻŦā§ āĻ¨āĻž āĻĒā§āĻ°āĻžāĻ¸āĻā§āĻāĻŋāĻ āĻāĻāĻ¨ āĻ āĻĒā§āĻ°āĻŦāĻŋāĻ§āĻžāĻ¨ā§āĻ° āĻ āĻ§ā§āĻ¨ā§ āĻŦāĻŋāĻĒāĻŖāĻ¨ āĻ¯ā§āĻāĻžāĻ¯ā§āĻ āĻšāĻŋāĻ¸ā§āĻŦā§āĨ¤ āĻ āĻ¨ā§āĻā§āĻ°āĻš āĻāĻ°ā§ āĻ¨āĻŋāĻļā§āĻāĻŋāĻ¤ āĻāĻ°ā§āĻ¨ āĻ¯ā§ āĻāĻĒāĻ¨āĻŋ āĻ -āĻ¸ā§āĻŦāĻžāĻ§ā§āĻ¨ āĻŦāĻŋāĻ¨āĻŋāĻ¯āĻŧā§āĻ āĻ¸āĻāĻā§āĻ°āĻžāĻ¨ā§āĻ¤ āĻāĻŽāĻžāĻĻā§āĻ° āĻŦāĻŋāĻā§āĻāĻĒā§āĻ¤āĻŋ āĻĒāĻĄāĻŧā§āĻā§āĻ¨ āĻāĻŦāĻ āĻŦā§āĻā§āĻā§āĻ¨āĨ¤ āĻĒā§āĻ°ā§āĻŦā§āĻā§āĻ¤ āĻ¤āĻĨā§āĻ¯ āĻ¸āĻŽā§āĻĒāĻ°ā§āĻāĻŋāĻ¤ āĻāĻŦā§āĻˇāĻŖāĻž āĻāĻŦāĻ āĻā§āĻāĻāĻŋ āĻ¸āĻ¤āĻ°ā§āĻāĻ¤āĻž, āĻ¯āĻž āĻāĻāĻžāĻ¨ āĻĨā§āĻā§ āĻĒā§āĻ°āĻŦā§āĻļ āĻāĻ°āĻž āĻ¯ā§āĻ¤ā§ āĻĒāĻžāĻ°ā§āĨ¤