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DXY: will Jerome Powell stop the strengthening of the dollar?
US Dollar Index, index, DXY: will Jerome Powell stop the strengthening of the dollar? Trading idea for the dollar index (DXY) for August 25The dollar index leads among other forex currency indices and reached 104.15 on Friday, moving further away from the local low of 101.50.At the same time, it should be noted that DXY is growing despite the weak macroeconomic reports of the United States. So on Wednesday, business activity indices were released, which turned out to be significantly worse than expected. In particular, the activity of the manufacturing sector fell from 49 to 47 pp, in the service sector from 52.3 to 51. The composite index sank from 52 p to 50.4 p. The release reduced the yield of treasury bonds by more than 1.5%.Yesterday, investors were disappointed by the data on orders for durable goods, which sank by 5.2% in July. At the same time, the report on applications for unemployment benefits recorded 230 thousand applications with a forecast of 240 thousand.Today, the main event of the day and week will be Jerome Powell's speech at the economic symposium in Jackson Hole (14:00 GMT). Buyers of DXY hope that the head of the Fed will confirm the regulator's intentions to continue the rate hike cycle. Sellers expect that weak US statistics will force the Central Bank to abandon monetary restriction and even consider switching to monetary policy easing.FedWatch Tool estimates the probability of a rate hike in September by 25 basis points as 39%. If Jerome Powell declares his readiness to keep the rate at current values until the end of the year, the dollar will go into a sharp decline with the target marks of 101.00 and 100.00.We will set a pending order for the sale of DXYSell-limit 104.50take-profit 101.00stop-loss ...
DXY: the outlook for the dollar index depends on NFP
US Dollar Index, index, DXY: the outlook for the dollar index depends on NFP Trading idea on Dollar Index (DXY) for August 4, 2023On Friday, the dollar index is declining, building on Thursday's bearish momentum and trading around 102.20, retreating further from the local high of 102.64 on July 7.The negative dynamics of DXY was triggered by the release of the report on initial jobless claims, which showed an increase in the number of applications by 6 thousand to 227 thousand. In addition, the business activity indices of the manufacturing and services sectors of the U.S., published during the week, signaled an economic slowdown.Analysts believe that the decline in services PMI from 53.9 to 52.7 ppts was caused by the tightening of financial conditions of the Federal Reserve and a decline in domestic demand.Also negative factor for DXY should be considered the reduction of the US credit rating from AAA to AA+. by Fitch agency This decision may cause diversification of investment portfolios of the world central banks not in favor of the dollar.Today the main event of the day and week will be the release of the US labor market report (12:30 GMT). Jerome Powell has repeatedly stated that all Fed decisions will be based on external data. Labor market and inflation reports remain the most important releases for the regulator.According to forecasts, it is assumed that in July the U.S. economy created 200 thousand jobs. In June, the figure amounted to 209 thousand and disappointed traders, causing a sell-off in the dollar. It is likely that the June scenario will be repeated today. In addition, it is expected that the wage growth rate in the reported month decreased from 4.4% to 4.2%.If the actual numbers match the expected numbers, the Fed may refuse to raise the rate further, which would send the dollar lower.We suggest including a DXY sell order into the trader's trading plan\Sell-stop 102/10 take-profit 100.50 stop-loss ...
DXY: investors await final Fed rate hike
US Dollar Index, index, DXY: investors await final Fed rate hike Dollar Index (DXY) Trading Idea for July 26, 2023Since the beginning of the week, the dollar index has been trading around 101.00. Investors are waiting for the outcome of the Fed's two-day meeting, which will be released today at 18:00 GMT.The weak United States business activity indices published at the beginning of the week put pressure on the US currency index. Although the manufacturing business activity index rose from 46.3 to 49.0, it still remains below the key 50.0 level. Service sector business activity fell from 54.0 to 52.4 pp.The FOMC is expected to raise the rate by 25 basis points to 5.5% at today's meeting. However, investors are more interested in the regulator's monetary policy outlook, which they hope to hear about during Jerome Powell's press conference half an hour after the official release.Analysts believe that today's act of monetary restriction will be the final in the cycle of rate hikes and after it the regulator will take a wait-and-see attitude. The Central Bank will start easing financial conditions not earlier than the first quarter of 2024.Actually, the markets have already factored today's rate hike into asset prices, so the rule "buy on rumors, sell on facts" is relevant again. Nevertheless, we believe that the dollar index will be weaker against other forex indices and we prioritize short positions on DXYsell-limit 101.50 take-profit 99.50 stop-loss ...
The "ceiling" in the United States has been raised. But the problems remain
US Dollar Index, index, The \ Everyone was very afraid that the US would default, but it seems to have been cleared: Congress approved the increase of the national debt limit. But that doesn't mean that all is well ahead. As soon as the US starts printing new Treasuries, their stock market might crash. After all, the big problems of the US economy are not going anywhere.The budget deficit will remain largeThere are no options: The Treasury needs to borrow urgently to fill the hole. For several months, the government has been literally scraping at the coffers to avoid a default. Now, over the next three months, the Finance Ministry will have to borrow $730 bln, according to Morgan Stanley. The deficit is not going to disappear: the Democrats did not cut so much spending, and now the elections are approaching: no time to save.As a result, not only will the national debt grow, but (even worse) the cost of its service. In a few more years, the US budget will spend more on bond coupons than on military spending.All the factors are in place to keep those interest rates even higher:High inflation is keeping the key rate down.The default issue has not disappeared, but is "hanging in the air," and the profitability will have to tempt investors to take the risk.Investors will flee into treasuriesWhy risky assets when there is a safe haven of treasuries? As long as rates are high, US government bonds have attractive yields. So a new issue could be bought back quickly - and liquidity would plummet from the market.Investors are really worried: bets on the decline of the major ETFs in the US have reached a record high, notes Goldman ...

Articles about financial markets

Remuneration of American CEOs has reached a record
S&P 500, index, Remuneration of American CEOs has reached a record The annual compensation of CEOs in the United States is breaking records, despite a shortage of workers and inflation. According to MyLogIQ (a provider of analytical products of the U.S. Securities and Exchange Commission), the median salary of executives from the S&P 500 companies reached $14.2 million last year. The salary growth of the majority of company executives was at least 11%.Half of the companies also said that the salary of ordinary employees increased by 3.1% last year, and a third of the companies reported that employee compensation, on the contrary, decreased between 2020 and ...
Updating drivers - looking for landmarks
S&P 500, index, Updating drivers - looking for landmarks The past year ended very successfully for the American market: the S&P 500 rose by 26.9%, although initially a more modest increase was expected. So, our optimistic (!) scenario included an increase in the broad market index to only 10%. However, the US stock markets got off to a good start and remained on top with the support of the adoption of infrastructure reform. The economic recovery also turned out to be more active than we expected, and this helped companies to increase revenue and profit more intensively. At the same time, the development of all these trends contributed to the acceleration of inflation, which went far beyond the expectations of the Fed, the market and our forecasts. It was inflation that became the most discussed topic last year and will absolutely remain at the top of the agenda in the first half of 2022.To bring inflation under control, the Fed thought about reducing the balance sheet only at the beginning of this year: even in December 2021, there was no talk about it. The reduction of the balance sheet, combined with a sharper than originally planned increase in rates, can act as a reliable way to curb inflation expectations. These expectations are formed mainly on stock exchanges, which excludes their negative impact on the economy in general and on the labor market in particular. A steady positive trend in the labor market is indicated by data for October, when the number of open vacancies reached a record 11.03 million, 1.5 times exceeding the number of applicants. This ratio was last observed 50 years ago. Together with an increase in logistics efficiency, the restoration of production capacities and the gradual opening of the economy, this will lead to a gradual decrease in inflation. Of course, we have repeatedly talked about the upcoming opening of the economy after the pandemic during the second half of 2021, but this event is delayed due to the appearance of new COVID-19 strains. And yet, the longer the pandemic continues, the closer its end is.After a negative start to the year for most securities in the technology sector and a general correction, investors should consider closing hedging positions that I advised opening at the end of last year. Now is the time to buy a wide range of stocks with a focus on "value" and "quality" companies. The intensive growth of the economy serves as the basis for optimistic expectations regarding revenue and profit. That is why the upcoming reporting season is the strongest driver of the growth of quotations of representatives of the real sector of the economy. Of course, there is also a trend to reduce the cash flows of companies, since there is no effect of a low base and economic growth begins to slow down. However, it is predicted that the S&P 500 companies will increase sales by almost 15%, and their earnings per share will increase by 21.5%. Among the leaders will be the energy, raw materials and industrial sectors, as well as the segment of secondary necessities. The momentum for an upward movement in their quotes will be provided by strong results for the fourth quarter and optimistic forecasts for January-March. Separately, I would like to note the financial sector, which will not be able to demonstrate a record increase in revenue and profit, but industry forecasts for 2022 may become one of the most optimistic, taking into account the plans of the Federal Reserve to actively raise the key ...
Weekly review. January 10, 2022
EUR/USD, currency, US Dollar Index, index, Brent Crude Oil, commodities, Gold, mineral, Weekly review. January 10, 2022 The year 2022 on world markets will largely be determined by the tightening of monetary policy in the United States, and the first week of the new year confirmed this. The minutes of the Fed's December meeting published last week showed a significant tightening of the position of the regulator's representatives – Fed members believe that the rate can be raised as early as March, and also see a faster reduction in the balance sheet as appropriate. Representatives of the regulator believe that the current economic conditions are already in many ways conducive to tightening the labor market, some even noted the recovery of the labor market already sufficient for such actions, although the majority still expects further improvement in the labor situation. Against this background, it is worth noting the publication of December labor data in the United States, which came out ambiguous. On the one hand, employment in December increased by only 200 thousand. The Bloomberg consensus forecast assumed an employment growth of 450 thousand, and the actual growth rate of the indicator was the lowest since the beginning of 2021. Nevertheless, in many respects such weak employment growth is explained by seasonal adjustment, and the unemployment rate in December fell more than expected. Thus, the indicator has updated the next lows since the beginning of the pandemic, dropping to 3.90% against the expected 4.10%. The unemployment rate continues to approach a historic low of 3.40%, and labor statistics have further increased fears in the market of an imminent tightening of the PREP in the United States. As a result, on Friday, the yields of ten-year US treasuries at the moment exceeded 1.80% per annum - the maximum since the beginning of the pandemic. Today they have returned to these levels again.This week, the dynamics in the market will continue to be determined by expectations for the actions of regulators - investors will follow the statements of representatives of the Fed and the ECB, as well as the publication of price data in the United States for December. Statistics published last week showed an increase in inflation in the EU to 5.00% YoY. As a result, the topics of price growth in December updated the historical maximum, while analysts expected a slight slowdown in price growth. The situation on the supply side also has high inflation in the United States. The December business activity indices indicated a slight easing of logistical problems, however, the further deterioration of the epidemiological situation again intensified disruptions in logistics chains, which does not lead to a significant slowdown in price growth. The FAO World Food Price index fell in December for the first time since July, but food inflation remains at elevated levels. Against this background, US inflation data is likely to continue to bring the Fed rate hike closer, intensifying the negative in the markets.The main event for the oil market in early 2022 was the OPEC+ meeting. However, as expected, it was decided to stick to the current plan to increase production. Nevertheless, the cartel lowered its forecasts for a surplus in the oil market, which allowed Brent crude futures to exceed the level of $80/bbl. Moreover, against the background of interruptions in the supply of black gold from Kazakhstan and Libya, quotations were close to $83/bbl. However, at the end of the week they declined from these levels, today Brent futures are growing by 0.35% and are trading around $82.05/bbl. The main negative for oil this week may be related to the potential strengthening of the dollar amid expectations of a tightening of the PREP in the United States. However, in the absence of a significant strengthening of the dollar, Brent futures may still exceed the levels of $83/bbl– - the quotes may be supported by another weekly decline in oil ...
Inflation is rising in Germany
DAX, index, Inflation is rising in Germany The German Statistical Office published the final data on the dynamics of consumer prices in October in accordance with European reporting standards. They indicate an acceleration of inflation to 4.6%. The indicator is calculated in relation to the prices that were fixed a year earlier. In monthly terms, consumer prices showed an increase of 0.5%. For comparison: in September, inflation in annual and monthly terms was 4.1% and 0.3%, respectively. The calculation of indicators according to German standards showed an increase in the inflation rate in Germany to a maximum for the period since 1993. It amounted to 4.5% in annual terms. Compared to September, prices rose by 0.5%. Both indicators correspond to the forecasts of the surveyed analysts. By the end of September, inflation was 4.1% compared to the same month last year. In monthly terms, it showed zero dynamics. The largest contribution to the growth of October inflation was made by energy carriers. They have risen in price by 18.6%. The cost of food increased by 4.4%. Prices for services increased by ...
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