Forex Daily Analysis: 30 Jan 2024

CURRENCIES:

Event Overview: Fed’s First Monetary Policy Decision of 2024
- Announcement Date: Wednesday, Jan 31, 2024
Potential Market Impact
- Increased Volatility Expected for Gold Prices, U.S. Dollar, and Stocks
- Traders Advised to Prepare for Heightened Volatility and Unpredictable Price Movements
FOMC Expectations
- FOMC Anticipated to Maintain Key Interest Rate in 5.25% to 5.50% Range
- Possibility of Dropping Language Indicating Likelihood of Additional Policy Firming
- Potential Shift Toward a More Dovish Stance
Policy Considerations
- Strong U.S. Economy Supports a Tightening Bias
- Dovish Posture Might Emerge to Address Labor Market Concerns
- Early Action Seen as Risk Mitigation to Avoid Extreme Accommodative Measures Later
Potential Outcomes and Market Responses
- Possibility of First-Rate Cut Teased for March Meeting
  - Result: Broad-Based Drop in U.S. Treasury Yields, Bullish for Stocks and Gold, Bearish for U.S. Dollar
- Hawkish FOMC Stance, Pushing Back Against Rate Cut Expectations
  - Result: Sharp Rise in Nominal Yields and U.S. Dollar, Hostile for Equity Market and Precious Metals in Near Term
Market Insights and Preparations
- Expect Attractive Trading Opportunities, But Caution Advised Due to Potential Volatility
- Monitoring FOMC’s Language Changes Crucial for Anticipating Market Reactions
- Traders Encouraged to Stay Informed and Navigate Complex Market Conditions

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STOCK MARKET:

Big Tech Dominance
- Recent data from FactSet emphasizes continued significance of Big Tech in market dynamics.
- Market strategists anticipate Big Tech to drive Q4 earnings growth for the S&P 500, countering calls for market rally broadening.
Earnings Expectations
- Apple, Alphabet, Microsoft, Amazon, Meta, and Nvidia projected to contribute a combined 53.7% earnings growth in Q4.
- In contrast, expectations for the remaining 494 S&P 500 companies suggest a 10.5% decline.
- Companies such as Apple, Alphabet, Microsoft, Amazon, and Meta scheduled to report Q4 results this week.
Overall Market Direction
- Following Tesla’s Q4 disappointment, Evercore ISI’s Julian Emanuel deems stock price reactions to Big Tech earnings as “critical for overall market direction.”
Massive Expectations for Some
- Notable earnings projections include Nvidia’s expected 400% YoY growth and Meta’s anticipated 175% YoY growth in EPS.
Continued Growth Anticipation
- FactSet’s second chart predicts nearly 80% earnings growth in Q1 2024 for Amazon, Alphabet, Meta, and Nvidia.
- The remaining 496 companies, including Apple, Microsoft, and Tesla, forecasted to grow earnings by a combined 0.3%.
Market Valuation
- Massive earnings expectations contribute to the S&P 500’s all-time highs, potentially justifying its valuation.
- Increased technology weight in the index is seen as a factor supporting overall growth.
Tech’s Role in Recent Market Rally
- Analysis by Yahoo Finance’s Jared Blikre indicates that, excluding Tesla, tech companies drove nearly 90% of the market’s growth during the January rally.
Beyond Quarterly Numbers: Key Market Narratives
- Tech earnings updates extend beyond financial figures.
- Focus on narratives during earnings calls, including:
  - Artificial intelligence advancements at Meta and Nvidia.
  - Scrutiny on Microsoft and Amazon’s cloud revenues.
  - Apple’s products business reflecting hardware demand and consumer spending.
Market Significance of Tech Earnings
- Tech earnings viewed as crucial indicators not only for performance expectations but also potential warnings of economic slowdowns if results fall short of estimates.