January 22, 2024
Forex Markets Update: 22 Jan 2024
CURRENCIES:
Equities Forecast:
- US equities, including the S&P 500 and Dow Jones, reach fresh all-time highs, propelled by a robust performance in big tech stocks.
- The ongoing Q4 earnings season, especially results from the ‘Magnificent Seven’ companies, is anticipated to further boost US indices.
- Notably, Microsoft alone holds a significant 7.29% weighting in the S&P 500 index.
US Dollar Performance:
- The US dollar initiates the year with strength, attributed to Federal Reserve Members countering overly optimistic interest rate cut expectations.
- US Treasury yields support the USD against various currencies.
- Precious metals, particularly gold, face pressure as they test the $2,000/oz. level.
Upcoming Events and Releases:
- A multitude of Q4 US earnings releases is scheduled for the upcoming week.
- Key economic events include the closely monitored Bank of Japan Quarterly Outlook Report, significant given elevated USD/JPY levels.
- Thursday brings the European Central Bank (ECB) policy decision, while Friday features the US core PCE release, positioning them as the week’s main attractions.
Monday
- Economic data: Leading Index, December (-0.3%, expected, -0.5% prior)
- Earnings: United Airlines, Logitech, Zions Bancorporation Top of Form
STOCK MARKET:
Market Highlights:
- US equities achieve new record highs with S&P 500, Dow Jones, and Nasdaq Composite in positive territory for January.
- Consumer sentiment data from the University of Michigan boosts positive vibes as consumers express confidence in the economy.
Corporate Earnings:
- Tech results take center stage with Netflix (NFLX) earnings on Tuesday and Tesla (TSLA) on Wednesday.
- Other notable reports include Johnson and Johnson (JNJ), United Airlines (UAL), Verizon (VZ), and AT&T (ATT).
- Overall, one of the busiest weeks for quarterly reports on Wall Street.
Economic Data:
- First reading of Q4 economic growth expected on Thursday.
- Release of the Personal Consumer Expenditures (PCE) Index, the Fed’s preferred inflation gauge, scheduled for Friday.
Economic Growth Outlook:
- Resilient data indicates a potential 2% annualized growth in the US economy for Q4.
- Oxford Economics expresses confidence in the ongoing economic expansion, citing a strong labor market, deceleration in inflation, and looser financial conditions.
Inflation and Rate Cut Speculations:
- Key debate centers on when the Federal Reserve will cut interest rates.
- Investors shift from an 81% chance of a March rate cut to 49%.
- Goldman Sachs chief economist anticipates a March rate cut, driven by a decline in inflation to the target of 2%.
Upcoming Events:
- Federal Reserve in blackout period, focusing attention on earnings as a key driver of stock market sentiment.
- Technology earnings, particularly from large-cap companies, may influence short-term market direction.
- Focus on Netflix demand for new advertising tier and Tesla’s margins, with CEO Elon Musk’s comments under scrutiny.
- Fourth quarter earnings show a weak start, but the narrative is expected to shift to Technology and Communication Services, where growth is anticipated.
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