The Industry Spread

Global FX Market Summary: USD, Geopolitical Tensions, ECB : 27 September ,2024

  • Industry Spread

    • US inflation easing, Fed expected to cut rates. Euro weak, US dollar strong. Dow Jones rallies, market outlook uncertain.

    1. US Inflation and Federal Reserve Policy

    • Easing Inflation: The US Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred inflation measure, showed signs of cooling. This aligns with the Federal Reserve’s efforts to combat inflation.
    • Fed Rate Expectations: Markets are anticipating further interest rate cuts from the Federal Reserve. The CME Group’s FedWatch Tool indicates a high probability of another 50-basis point reduction at the November policy meeting.
    • Economic Outlook: While inflation is easing, there are concerns about a potential recession due to mixed economic indicators. The US Gross Domestic Product (GDP) grew in the second quarter, but other data like durable goods orders and unemployment claims paint a mixed picture.

    2. Currency Pair Dynamics: EUR/USD

    • Euro Weakness: The euro is under pressure due to softer inflation data from France and Spain, suggesting that the European Central Bank (ECB) may cut interest rates.
    • US Dollar Strength: The US dollar is gaining strength, partly driven by expectations of a more aggressive policy easing by the Federal Reserve. However, the dollar’s gains are limited by the overall easing trend in US monetary policy.
    • Geopolitical Factors: The risk-on sentiment in the market, fueled by expectations of stimulus measures from China, is also supporting the US dollar as a safe-haven asset.

    3. Stock Market Performance

    • Dow Jones Rally: The Dow Jones Industrial Average (DJIA) reached a new record high, driven by the positive inflation data and improved consumer sentiment.
    • Market Outlook: Investors are focusing on upcoming economic indicators, including the Nonfarm Payrolls (NFP) report and Purchasing Managers Index (PMI) data, to assess the overall health of the US economy.
    • Uncertainty: While the stock market is currently bullish, there is uncertainty about future market movements due to potential economic challenges and geopolitical factors.

     

    The following are the 10 main economic events for next week:

     

    1. US Nonfarm Payrolls (NFP) Report
    • Date: October 4, 2024
    • Impact: High
    • Description: This report provides insight into the health of the US labor market, a crucial indicator of economic growth. A strong NFP report can boost the US dollar and stock market, while a weak report can have the opposite effect.
    1. US Consumer Price Index (CPI)
    • Date: October 4, 2024
    • Impact: High
    • Description: CPI measures inflation, a key economic indicator that influences interest rates and the value of the US dollar. A higher-than-expected CPI reading can indicate rising inflation pressures, leading to a stronger US dollar and potentially higher interest rates.
    1. China Manufacturing and Services PMIs
    • Date: September 30, 2024
    • Impact: High
    • Description: These indexes measure the manufacturing and services sectors in China, the world’s second-largest economy. A decline in these PMIs can indicate economic slowdown in China, which can negatively impact global markets.
    1. UK GDP Data
    • Date: September 30, 2024
    • Impact: High
    • Description: GDP measures the total value of goods and services produced in an economy. A strong GDP reading can boost the British pound and UK stock market, while a weak reading can have the opposite effect.
    1. ECB Monetary Policy Meeting
    • Date: October 3, 2024
    • Impact: High
    • Description: The European Central Bank (ECB) is expected to announce its interest rate decision. If the ECB raises interest rates, it can strengthen the euro and weaken other currencies.
    1. Japanese Tankan Survey
    • Date: September 30, 2024
    • Impact: Medium
    • Description: The Tankan survey measures business confidence in Japan. A decline in business confidence can weaken the Japanese yen.
    1. Australian Retail Sales
    • Date: October 1, 2024
    • Impact: Medium
    • Description: Retail sales measure consumer spending in Australia. A strong increase in retail sales can boost the Australian dollar.
    1. New Zealand Business Confidence
    • Date: September 30, 2024
    • Impact: Medium
    • Description: This survey measures business confidence in New Zealand. A decline in business confidence can weaken the New Zealand dollar.
    1. Canadian Manufacturing PMI
    • Date: October 1, 2024
    • Impact: Medium
    • Description: This index measures manufacturing activity in Canada. A decline in the PMI can weaken the Canadian dollar.
    1. Swiss Consumer Price Index (CPI)
    • Date: October 3, 2024
    • Impact: Medium
    • Description: CPI measures inflation in Switzerland. A higher-than-expected CPI reading can strengthen the Swiss franc.

     

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