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U.S. stock index futures point to positive start to trading

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Everyone understands US stock futures are explained. U.S. stock index futures and options are aiming for a positive start to the week of July 25 (ESU00: +0.33%), in anticipation of this week’s Fed policy meeting and earnings reports from some major companies that will help gauge the impact of a strengthening dollar and rising inflation.

U.S. stock index futures analysis

There will be plenty of catalysts this week, including reports from about 175 S&P500 companies, which make up nearly 50% of the index’s market capitalization; the FOMC decision on Wednesday; the preliminary Q2 GDP estimate, and the June personal income and spending statistics on Friday. Also, the Senate is expected to hold a final vote tomorrow on the CHIPS act semiconductor manufacturing bill.

Today, Philips (PHG) and Squarespace (SQSP) are among several companies that made moves down in the preliminary market after the earnings reports were released. The former reported better-than-expected earnings, but was downgraded by Societe Generale to “hold” from “buy.” The second company reported better-than-expected earnings, but posted a lower-than-consensus outlook for Q3 and FY22.

Several companies that recently reported a quarter below expectations blamed the strong U.S. dollar. Goldman Sachs calculations show that a 10% increase in the dollar, weighted by trading prices, has a 2-3% impact on earnings per share. The bank believes that many more companies will report weaker-than-expected earnings in Q2. Looking ahead, Goldman believes that U.S. stocks exposed to Europe will continue to underperform, and the outlook for Chinese-exposed stocks remains challenging.

Morgan Stanley once again reiterated its bearish stance on U.S. equities in the reporting season. The bank highlighted the breadth of downward revisions, particularly noticeable in sectors such as consumer staples, financials, industrials, materials, semiconductors, technology equipment and telecom services.

Morgan Stanley continues to urge investors to increase their stake in defensive growth rather than offensive growth, cautioning against trying to put a Fed pause on prices because, in its view, this cycle is not like previous ones.

Oil prices are rising before the open in wave trading, amid a balance of supply concerns and expectations that a U.S. interest-rate hike will dampen fuel demand. September WTI crude oil futures are at $96.36 a barrel (+1.75%).

Gold futures are fluctuating in a narrow range after breaking a streak of five weekly declines. August gold futures are near $1,722 an ounce (-0.30%).

The dollar weakened against major world currencies with the return of risk appetite in foreign exchange markets. The dollar rose initially, following a cautious Asian session in which investors were concerned about global growth prospects. The euro rose 0.26% to $1.0243 after the release of the German Ifo index.



Forex

Dollar just higher ahead of Fed minutes; euro awaits confidence data

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Dollar just higher ahead of Fed minutes; euro awaits confidence data
© Reuters.

Investing.com – The U.S. dollar traded marginally higher in early European trade Wednesday, as traders awaited the release of the minutes from the latest Federal Reserve meeting for further clues of the path of U.S. interest rates.

At 04:05 ET (09:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 104.102. 

Fed minutes could determine dollar direction

The dollar has slipped back slightly of late after waning expectations of early interest rate cuts by the Fed had seen the greenback climb to three-month highs.

The currency’s upcoming direction could well be decided by what the from the January Federal Reserve meeting, due for release later Wednesday,  indicate in terms of the outlook for U.S. rates.

“Recall this was seen as a pretty neutral meeting until Fed Chair Jerome Powell used an opportunity in the press conference to say that a March rate cut was unlikely,” said analysts at ING, in a note.

Traders are currently pricing in around 90 basis points worth of easing by the Fed this year, probably starting in June.

Beyond the minutes, a slew of Fed officials are also set to speak this week, including and later on Wednesday. 

Eurozone consumer confidence data due

In Europe, edged higher to 1.0807, ahead of the release of the latest figure for the eurozone.

This is expected to show a small improvement in February from the previous month, although it will likely remain very weak.

“If there is a ray of light for the eurozone economy it may be that wage growth is not falling as quickly as inflation and that there may be a boost from rising real incomes after all,” said ING.

traded marginally lower at 1.2616, after data showed that Britain recorded its highest ever in January as Chancellor Jeremy Hunt prepares his annual budget.

The U.K. recorded a budget surplus of £16.7 billion in January, due to record seasonal tax inflows, although the broader fiscal picture remains tough.

Chinese economic recovery on way?

In Asia, edged lower to 7.1891, with data showing increased consumer spending and travel demand during the Lunar New Year holiday, lifting hopes for a bigger recovery in consumption – which is a key driver of the Chinese economy.

The People’s Bank of China also cut its five-year by a bigger-than-expected margin on Tuesday, pointing to more support for the Chinese economy. 

rose 0.1% to 150.14, with the pair remaining above the widely-watched 150 level after data showed a bigger-than-expected increase in Japanese in January, while contracted more than expected. 

Breaks above 150 have attracted government intervention in the past, with officials also offering verbal warnings on any such moves last week.

 

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Asia FX retakes some ground as dollar retreats before more Fed cues

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Asia FX retakes some ground as dollar retreats before more Fed cues
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Investing.com– Most Asian currencies rose on Wednesday, seeing some relief as the dollar retreated in anticipation of more cues from the Federal Reserve on the path of interest rates. 

Regional units were still nursing steep losses in recent sessions as waning expectations of early interest rate cuts by the Fed saw the dollar race to three-month highs.

But the greenback retreated significantly from recent highs this week, offering some relief to Asian markets.

Dollar falls with Fed minutes, speakers in sight

The and both fell about 0.1% each in Asian trade, with investors collecting some profits in the greenback before a barrage of Fed cues this week.

The are due later on Wednesday, after the bank kept rates steady and largely downplayed expectations of early interest rate cuts.

Beyond the minutes, a slew of Fed officials are also set to speak this week, including   and later on Wednesday. 

Chinese yuan rises on economic recovery hopes

The rose 0.1% on Wednesday, also benefiting from some optimism over a potential economic recovery in Asia’s largest economy. 

Data showing increased consumer spending and travel demand during the Lunar New Year holiday drove up hopes over a bigger recovery in consumption- which is a key driver of the Chinese economy.

The People’s Bank of China also cut its five-year by a bigger-than-expected margin on Tuesday, pointing to more support for the Chinese economy. 

While lower rates bode poorly for the yuan, losses in the currency were stemmed by government intervention in currency markets. Media reports showed several Chinese state-owned banks buying yuan and selling dollars on the open market. 

Other Asian currencies trended higher. The rose 0.1% but remained at the 150 level. Data showed a bigger-than-expected increase in Japanese in January, while contracted more than expected. 

The and both traded sideways.

The rose 0.3%, leading gains across Asia on optimism over China, while stronger-than-expected Australia data for the fourth quarter drove bets that the Reserve Bank will keep interest rates higher for longer.

The was flat after strengthening further away from the 83 level in overnight trade.

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Dollar dips, China boosts global growth hopes

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Dollar dips, China boosts global growth hopes
© Reuters. FILE PHOTO: U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Karen Brettell

NEW YORK (Reuters) -The U.S. dollar weakened on Tuesday after China cut interest rates in a bid to prop up its struggling property market, raising hopes of additional stimulus that would boost global growth.

The yen gained, meanwhile, but stayed below the 150.88 per dollar level reached last Monday, its weakest in 11 weeks, as investors focus on whether renewed weakness in the Japanese currency is likely to prompt intervention by the Bank of Japan and Ministry of Finance.

China cut the five-year loan prime rate (LPR) by 25 basis points, which was the largest since the reference rate was introduced in 2019 and far more than analysts had expected.

“The thinking is if China hits the gas pedal then global growth will pick up. Then you start to see dollar selling and money going into emerging markets on the back of that,” said Adam Button, chief currency analyst at ForexLive in Toronto.

Bloomberg News on Sunday quoted Chinese Premier Li Qiang calling for “pragmatic and forceful” action to increase China’s confidence in the economy.

The Australian dollar, which is seen as a proxy for global growth, rose 0.20% to $0.6550, after earlier reaching $0.6579, the highest since Feb. 2.

In the offshore market, the yuan strengthened as far as 7.1963 per dollar, the strongest since Feb. 7.

Investors are also brushing off higher than expected U.S. consumer and producer price inflation data for January released last week as likely being impacted by seasonal adjustments and not indicating renewed price pressures. That would leave the Federal Reserve on track to begin cutting interest rates in the coming months.

“There’s a lingering feeling that the CPI numbers were more of a seasonal adjustment story than a resurgence in inflation story,” Button said. “If central banks wait until inflation is dead and buried then we might end up in a situation where risk assets struggle and global growth is crippled.”

The Fed on Wednesday will release minutes from its Jan. 30 to 31 meeting, which will be evaluated for any new clues on when the U.S. central bank is likely to begin cutting rates.

The was last down 0.21% at 104.08, and earlier reached 103.79, the lowest since Feb. 2. The euro rose 0.25% to $1.0804 and got as high as $1.0839, the highest since Feb. 2.

The greenback fell 0.05% to 150.04 Japanese yen, after earlier trading at 150.45.

The yen has lost 7% in value in 2024 alone, having weakened past the 150-level against the dollar on Feb. 13. In the past, traders have viewed 150 as a line in the sand for the Bank of Japan and the Ministry of Finance that could trigger intervention, as was the case in late 2022.

This time around, the move has been more gradual and volatility has been modest, which suggests little immediate nervousness from either Japanese authorities or currency traders.

Japanese finance minister Shunichi Suzuki said on Tuesday authorities were “closely watching FX moves with a high sense of urgency”, a phrase he has used previously, and stated the yen exchange rate was set by a number of factors.

Sterling gained after Bank of England Governor Andrew Bailey said on Tuesday he was comfortable with investors betting on interest rate cuts this year but pointed to signs that Britain’s economy was picking up after falling into recession in late 2023.

It was last up 0.20% at $1.2618 and earlier rose to $1.2668, the highest since Feb. 13.

The greenback gained 0.24% against the Canadian dollar to $1.3523 loonies.

Data on Tuesday showed that Canada’s annual inflation rate slowed significantly more than expected to 2.9% in January and core price measures also eased, bringing forward bets for an early interest rate cut.

In cryptocurrencies, bitcoin rose 0.33% to $52,076.

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