Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
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As we approach the week starting February 12, 2024, the financial community is on high alert, gearing up for a series of pivotal economic updates. These reports are crucial as they could significantly influence central bank decisions in the near term, particularly those of the Federal Reserve and the Bank of England. With the backdrop of ongoing global economic adjustments, the forthcoming data releases are set to provide critical insights into the current economic landscape.
The spotlight this week is on the US and UK, with both nations poised to release vital inflation and GDP figures. For the US, the Consumer Price Index (CPI) data stands out as a key indicator, offering fresh insights into inflation trends and potentially guiding the Federal Reserve’s rate cut expectations. Market participants are keenly awaiting this update, especially after recent labor market data suggested a more robust economic stance than anticipated.
In the UK, the focus shifts to a comprehensive economic update, including Q4 GDP figures, January inflation data, and labor market statistics. These releases are especially significant as they could hint at whether the UK economy is edging towards a recession, a scenario that would have profound implications for monetary policy and market sentiment.
Additionally, the Eurozone is not to be overlooked, with its own set of economic indicators due for release. Employment and industrial production figures will be closely watched for signs of economic resilience or weakness, potentially impacting Eurozone GDP revisions and broader market expectations.
For market analysts and forex traders, these developments are of paramount importance. The US CPI data, alongside the UK’s economic updates, not only shed light on the respective economies’ health but also offer valuable cues for currency market dynamics and trading strategies. Understanding these indicators is essential for navigating the complexities of the global financial markets effectively.
Key Highlights for the Week:
US CPI Data: A critical measure of inflation that could influence Federal Reserve rate cut expectations.
UK Economic Updates: Including Q4 GDP, January inflation, and labor market statistics, providing a comprehensive view of the UK’s economic health.
Eurozone Indicators: Employment and industrial production figures could signal economic trends and impact GDP revisions.
As we delve into this significant week, staying informed and agile is crucial for market participants. The upcoming economic indicators and central bank insights will not only enhance understanding of the current economic environment but also assist in refining trading strategies and market approaches.
Stay Ahead with Insightful Analysis: Keep abreast of these developments with our expert commentary and analysis, ensuring you’re well-equipped to make informed decisions in the ever-evolving financial markets.
Guidance on US Dollar from US Jobs Report: The upcoming U.S. jobs report will significantly influence the U.S. dollar’s direction, with implications for EUR/USD, USD/JPY, and GBP/USD trading setups.
Sensitivity to Nonfarm Payrolls Data: Financial markets and the U.S. dollar are poised to react to February’s nonfarm payrolls, potentially impacting the Federal Reserve’s easing cycle timing.
Technical Analysis for Major Currency Pairs: The article provides a technical perspective on EUR/USD, USD/JPY, and GBP/USD.
Anticipation of February’s Job Growth: The U.S. Bureau of Labor Statistics is set to release job figures, with expectations of adding 200,000 jobs, following January’s 353,000 job increase. The unemployment rate is projected to remain at 3.7%.
Potential for Surprises: Given recent trends of employment data surpassing estimates, there’s a heightened chance of an unexpected increase in job numbers.
Impact of Hiring Activity on Monetary Policy: A significant outperformance in hiring could delay anticipated central bank easing, adjusting interest rate expectations towards a more hawkish outlook.
Possible Market Reactions: Strong job growth may boost U.S. Treasury yields and help the U.S. dollar recover recent losses. Conversely, a disappointing NFP report could reinforce expectations for imminent Fed rate cuts, potentially lowering bond yields and pressuring the U.S. dollar.
STOCK MARKET:
Market Summary
February Jobs Report Preview: The upcoming release on Friday morning is anticipated to reveal a slowdown in hiring, maintaining the unemployment rate steady.
Expectations: Analysts predict the report will show 200,000 new nonfarm payroll jobs in February, with the unemployment rate unchanged at 3.7%, mirroring January’s figures.
January’s Performance: The U.S. economy saw a significant addition of 353,000 jobs, the highest in a year, while the unemployment rate stayed at 3.7%.
Key Metrics: Wall Street’s focus will be on several figures, including nonfarm payrolls, unemployment rate, average hourly earnings, and average weekly hours worked, comparing them to previous months’ data.
Labor Market Analysis: The report aims to determine if January’s job gains were an anomaly or indicative of the labor market’s strength. Wage growth, in particular, will be scrutinized for inflationary pressures.
Economic Forecasts: Oxford Economics expects a solid but cooler job growth in February and a reversal in the spike of earnings growth from January.
Federal Reserve’s Outlook: Fed Chair Jerome Powell described the labor market as “relatively tight” but noted improving supply and demand balance. The first Fed rate cut is speculated to be in June, with three to four cuts expected throughout the year.
Wage Growth Insights: Recent data presents a mixed view on wage growth, with job changers seeing increased wage gains in February, indicating persistent labor market activity.
Job Market Dynamics: The latest JOLTS report showed a decline in job openings and quits rate, suggesting moderation in wage growth which is crucial for the Fed’s inflation targets.
Market Anticipation: Investors are keenly awaiting the report, with expectations set for the timing and number of Fed rate cuts based on the job market’s performance.
Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
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On Thursday, the stock market witnessed significant gains, with the S&P 500 and Nasdaq Composite reaching new record highs, driven by investor optimism over easing inflation and robust gains in the technology sector. The S&P 500 increased by 1.03% to 5,157.36, while the Nasdaq Composite climbed 1.51% to 16,273.38, marking a notable recovery for Wall Street midweek. This positive momentum was fueled by optimistic global inflation trends signaled by the European Central Bank’s updated forecasts and Federal Reserve Chair Jerome Powell’s hints at potential interest rate cuts within the year. Additionally, the upcoming U.S. jobs report is eagerly awaited for further insights into the labor market’s resilience. The day’s market performance was also influenced by significant movements in the currency market, following dovish indications from the Federal Reserve, impacting major currency pairs and contributing to a cautiously optimistic market sentiment.
Stock Market Updates
Stocks experienced a notable rise on Thursday, propelling the S&P 500 and Nasdaq Composite to new record highs, fueled by optimism regarding easing inflation and a surge in technology sector gains, contributing to Wall Street’s recovery midweek. The S&P 500 ascended by 1.03% to reach 5,157.36, and the Nasdaq Composite saw a 1.51% increase to 16,273.38, both marking record highs during the trading session, with the S&P 500 also achieving a record close. The Dow Jones Industrial Average experienced a more modest rise, gaining 130.30 points, or 0.34%, to conclude at 38,791.35. Leading the charge in the S&P 500, information technology, and communication services stocks, particularly Intel, stood out with a gain of over 3%, highlighting the sector’s significant contribution to the day’s positive market performance.
Fueling investor optimism, the European Central Bank (ECB) revised its forecasts to show lower expected annual inflation and growth rates, yet maintained steady key interest rates, a move interpreted as a positive indicator concerning global inflation trends. This development followed Federal Reserve Chair Jerome Powell’s address to Congress, where he anticipated a reduction in interest rates within the year, despite not being immediately prepared to initiate cuts. He expressed to the Senate Banking Committee that the Federal Reserve was nearing the confidence needed concerning inflation to commence rate reductions. Meanwhile, the market’s attention is drawn towards the upcoming U.S. jobs report, seeking insights into the labor market’s condition amidst ongoing resilience against the backdrop of higher interest rates. Notably, while the S&P 500 and Nasdaq displayed weekly gains, the Dow still faced a slight decline, underscoring the mixed yet cautiously optimistic sentiment prevailing in the market.
Currency Market Updates
The currency market saw significant movements following dovish signals from the Federal Reserve, as outlined by Fed Chair Jerome Powell during his congressional testimony. Powell’s indication of a potential rate cut in 2024, bolstered by his confidence in nearing the Fed’s 2% inflation target, led to a downward adjustment in the USD index, which fell by 0.38%. This dovish stance was further echoed in the adjustments of short-term interest rate futures, with expectations now set for 92 basis points of cuts by the December 18 FOMC meeting. This shift in sentiment has reversed some of the dollar’s gains from February, influencing major currency pairs, notably with the EUR/USD rallying by 0.34% to 1.0934, despite the European Central Bank’s (ECB) decision to hold rates steady and a somewhat less dovish commentary from ECB President Christine Lagarde.
In the Asian currency markets, the USD/JPY pair witnessed a notable decline, dropping by 0.87% to 148.09, influenced by the dovish Fed outlook and speculative adjustments ahead of the Bank of Japan’s (BoJ) meeting. Market participants are closely watching for any signs of a policy shift by the BoJ, which could predate the Fed’s anticipated rate cuts. Meanwhile, the GBP/USD pair reached a new high for 2024 at 1.2798, buoyed by the relative firmness of the pound against a backdrop of dovish stances from both the ECB and the Fed, and sustained by higher UK inflation expectations relative to the U.S. and the Eurozone. Additionally, broader market movements were seen in the rise of Bitcoin and gold prices, both benefiting from the lower rate environment suggested by the Fed’s dovish outlook, highlighting the interconnectedness of global financial markets and the significant impact of central bank policies on currency valuations.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD breaks past 1.0900 amidst dovish central bank outlooks and weak US dollar
EUR/USD has successfully breached the significant 1.0900 level, reaching multi-week highs as the US dollar faces heightened selling pressure following Chair Jerome Powell’s testimony and disappointing US labor market data. The US dollar index (DXY) continued its decline for the fifth session, hitting five-week lows, amidst ongoing speculation of a Fed rate cut in June. Concurrently, German 10-year bund yields hit multi-week lows after the ECB maintained interest rates, reflecting a cautious market sentiment.
Fed Chair Powell’s comments hinted at potential interest rate cuts within the year, contingent on a confident trajectory towards the 2% inflation target, with market expectations of a June rate cut rising to 60%. Meanwhile, the ECB’s steady outlook forecasts moderate economic growth and a gradual reduction in inflation, despite acknowledging challenges such as labor demand slowdown and domestic price pressures.
Despite the ECB’s and the Fed’s dovish stances potentially indicating the start of easing cycles, the stagnant euro area fundamentals against the backdrop of the resilient US economy suggest a stronger dollar in the medium term. This dynamic sets the stage for a possible deeper correction in EUR/USD, targeting its year-to-date low around 1.0700 and potentially extending towards late 2023 lows in the 1.0500 area, reflecting the nuanced interplay of monetary policies and economic indicators in currency market movements.
On Thursday, the EUR/USD moved higher and was able to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential upward movement to reach above the next resistance level. Notably, the Relative Strength Index (RSI) maintains its position at 71, signaling a bullish outlook for this currency pair.
Euro’s Future Dependent on ECB’s Direction: The outlook for the Euro hinges on the European Central Bank’s (ECB) upcoming guidance, with focus on EUR/USD, EUR/GBP, and EUR/JPY trading strategies.
ECB Meeting Anticipation: The ECB’s meeting on Thursday is expected to maintain interest rates, marking the fourth consecutive time without change. Investors are advised to pay close attention to President Lagarde’s press conference for insights into future monetary policy.
Expected Stance from Lagarde: President Lagarde is anticipated to maintain a neutral position, avoiding any hints that might set unrealistic market expectations.
Growth and Inflation Concerns: Recent disappointing growth data and stalled disinflation progress suggest a cautious approach, despite January’s CPI in the Eurozone exceeding forecasts, indicating persistent inflation, especially in the service sector due to rapid wage growth.
ECB’s Strategy: The ECB is likely to emphasize a data-dependent approach, steering clear of committing to a fixed policy path to manage market expectations.
Euro Trading Scenarios: The euro could strengthen if the ECB suggests delaying easing measures, indicating a hawkish shift in interest rate expectations. Alternatively, hints at possible early rate cuts could negatively impact the euro.
STOCK MARKET:
Stock Market Recovery Led by Powell’s Remarks
Stocks experienced a rebound as Federal Reserve Chair Jerome Powell maintained his stance on potential interest rate cuts within the year.
Key Index Performances
Dow Jones Industrial Average (^DJI) increased by 0.20%.
S&P 500 (^GSPC) rose by 0.51%.
Nasdaq Composite (^IXIC) surged by 0.58%.
Market Dynamics
U.S. stocks, particularly in the technology sector, recovered from a significant sell-off after Powell’s comments on the likelihood of interest rate cuts later in the year.
Powell’s Congressional Testimony
Powell’s upcoming testimony to Congress is anticipated to further influence stock market movements, following a period of losses exacerbated by concerns over major tech companies like Apple and Tesla.
Interest Rate Cut Outlook
Powell indicated to the House Financial Services Committee that rate cuts are probable in 2024, contingent on the economy’s performance aligning with expectations.
Investor Sentiment
Market participants are keenly awaiting more details from Powell over the next two days, looking for any shifts from the Federal Reserve’s consistent message on interest rate policies.
Notable Stock Movements
New York Community Bank (NYCB) saw a dramatic change in its stock price, initially dropping then closing up over 7% after announcing a new CEO and securing a $1 billion investment led by a group including Steven Mnuchin.
As part of our commitment to provide the most reliable service to our clients, there will be server maintenance this weekend.
Maintenance Hours :
10th of March 2024 (Sunday) 07:00 – 14:00 (GMT+2)
Please note that the following aspects might be affected during the maintenance:
1. To accommodate the daylight saving time adjustment, upon the completion of this upgrade maintenance, the system time will transition from the original GMT+2 to GMT+3.
2. The price quote and trading management will be temporarily disabled during the maintenance. You will not be able to open new positions, close open positions, or make any adjustments to the trades.
3. There might be a gap between the original price and the price after maintenance. The gaps between Pending Orders, Stop Loss and Take Profit will be filled at the market price once the maintenance is completed. If you don’t want to hold any open positions during the maintenance, it is suggested to close the position in advance.
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Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.
Please refer to the table below for more details:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.
If you’d like more information, please don’t hesitate to contact [email protected].
Wednesday saw a notable rebound in major U.S. stock indices, with the S&P 500, Nasdaq, and Dow Jones all recording gains, despite mixed performances across sectors and continued concerns over a troubled regional bank. The positive shift in the stock market contrasted with a decline in the U.S. dollar following dovish remarks from Federal Reserve Chair Jerome Powell, who hinted at potential rate cuts later in the year. This news, coupled with movements in the currency markets and Powell’s testimony on Capitol Hill, influenced trader sentiments, leading to fluctuations across a broad spectrum of financial markets, from major currency pairs to commodities like gold and Bitcoin.
Stock Market Updates
Stock markets witnessed a positive shift on Wednesday, rebounding from consecutive losses in prior sessions, with the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average making gains. The S&P 500 climbed by 0.51% to 5,104.76, the Nasdaq increased by 0.58% to 16,031.54, and the Dow rose modestly by 0.2% to 38,661.05, despite a notable drop in Disney shares. This upward movement provided a temporary relief from the recent downturns that had pulled the indexes away from their record highs. However, the gains were somewhat limited due to Apple’s continued decline and growing concerns over a troubled regional bank, impacting the broader market sentiment.
The day also saw mixed performances in the technology sector and fluctuations in regional bank stocks, influenced by New York Community Bancorp’s announcement of a $1 billion capital raise, which initially sent shares plummeting before recovering to close 7.5% higher. Attention was also focused on Capitol Hill, where Federal Reserve Chair Jerome Powell indicated a potential lowering of interest rates later in the year, citing the current peak of the tightening cycle. Powell’s remarks came during his testimony before the House Financial Services Committee, ahead of a scheduled appearance before the Senate Banking Committee, signaling a cautious yet optimistic outlook for future monetary policy adjustments.
Currency Market Updates
The currency market experienced significant movements as recent economic data and comments from Federal Reserve Chair Jerome Powell influenced trader sentiments. The USD index saw a decline of 0.46% after disappointing ADP and JOLTS reports suggested that previous Federal Reserve rate hikes were beginning to impact the U.S. economy, hinting at a potential slowdown that could help steer inflation towards the Fed’s 2% target. Powell’s semi-annual monetary policy testimony further pressured the dollar as he hinted at the possibility of easing monetary restraint later in the year, acknowledging the progress towards achieving the 2% inflation target. These developments led to a dip in U.S. Treasury yields and bolstered expectations for rate cuts in 2024, overall weighing down on the dollar across the board.
In response to the dovish outlook presented by the Federal Reserve, major currency pairs saw notable movements. The EUR/USD pair rose by 0.42%, benefiting from the narrowing yield differentials between U.S. and European bonds, which encouraged investors to add to their long positions in the Euro. Similarly, the USD/JPY pair declined by 0.5% as the prospect of lower Fed rates and speculation about the Bank of Japan normalizing rates led to a reduction in USD/JPY long positions. The GBP/USD pair also gained, moving to a session high, driven by expectations that the Bank of England might maintain higher interest rates compared to the U.S. for a longer period. Commodity currencies like the AUD benefited from the dovish Fed stance, with the AUD/USD rallying by more than 1%. Additionally, Bitcoin and gold prices surged, benefiting from the lower interest rate environment, with gold reaching a new all-time high, highlighting the broad impact of Fed policies on financial markets.
Picks of the Day Analysis
EUR/USD (4 Hours)
EUR/USD Surges Past 1.0900 Amid Dollar Weakness and Interest Rate Speculations
EUR/USD experienced a notable surge, breaking through the critical 1.0900 mark to reach multi-week highs, driven by a weakened US Dollar in response to disappointing ADP report outcomes and an uneventful testimony from Fed Chair Powell. Concurrently, the US Dollar Index (DXY) saw a decline for the fourth consecutive session, reaching five-week lows, amid anticipations of a potential Fed rate cut in June and declining US yields. Despite the downward trend in global yields, Germany’s 10-year bund yields showed slight increases, indicating caution ahead of an upcoming ECB event. With the Fed hinting at possible rate cuts within the year contingent on inflation trends, and the ECB projected to commence its easing cycle soon, the short-term outlook suggests a potentially stronger Dollar, especially if both central banks initiate easing measures around the same time. However, this scenario posits a deeper correction for EUR/USD, with an immediate target near its year-to-date low of 1.0700, possibly extending to late 2023 lows in the 1.0500 region.
On Thursday, the EUR/USD moved higher and was able to reach the upper band of the Bollinger Bands. Currently, the price is moving just below the upper band, suggesting a potential upward movement to reach above the next resistance level. Notably, the Relative Strength Index (RSI) maintains its position at 68, signaling a bullish outlook for this currency pair.
Market capitalisation, frequently referred to as ‘market cap,’ serves as a vital metric for evaluating a company’s value in the stock market, akin to a comprehensive price tag for the entire entity.
New York Stock Exchange source: ABC News
Understanding market capitalisation is pivotal as it offers traders insights into a company’s prominence within the market, thereby influencing their investment choices and risk management approaches.
Unveiling market capitalization
Market capitalisation stands as a fundamental metric in finance, utilised to evaluate a company’s value by encompassing the total worth of all outstanding shares of its stock.
Establishing market capitalisation occurs through an initial public offering (IPO), where an investment bank assesses the company’s value using diverse valuation techniques. This evaluation then determines the number of shares to be made available to the public and their respective pricing.
For example, if a company’s IPO value is set at $150 million, it may opt to issue 15 million shares at $10 each or 30 million shares at $5 each, ultimately resulting in an identical initial market cap of $150 million.
In simpler terms, market cap offers a glimpse into the prospective cost of purchasing all company’s shares at their prevailing market prices.
Understanding market capitalisation empowers investors and traders to evaluate a company’s stature and performance within the stock market.
Calculation methodology for market capitalisation
The computation of market capitalisation is straightforward, entailing the utilisation of a basic formula:
Market Cap = Current Stock Price × Total Outstanding Shares
Market capitalisation materialises through multiplying a company’s prevailing stock price by its aggregate outstanding shares. Here, the stock price signifies the value of an individual share in the company, while the total outstanding shares denote the available shares to the public.
Consider a hypothetical scenario involving XYZ Inc., with a current stock price of $50 per share and a total outstanding shares count of 10 million:
Thus, the market capitalisation of XYZ Inc. stands at $500 million.
Apple’s road to $3 trillion market cap source: Statista
Delving into diluted market capitalisation
Both in traditional markets and cryptocurrencies, diluted market capitalisation assumes significance in assessing a company or project’s comprehensive value. It accounts for additional shares, such as stock options or tokens earmarked for team members and advisors, which possess the potential to dilute the value of existing shares or tokens.
For instance, revisiting Company A, with a stock price of $50, 10 million outstanding shares, and potential additional shares from stock options equivalent to 1 million shares:
In this instance, Company A’s regular market capitalisation amounts to $500 million, whereas the diluted market capitalisation, factoring in potential additional shares, totals $550 million.
Understanding both formulations facilitates investors in gauging a company’s value more accurately, thus enabling informed investment decisions grounded on the company’s potential future share structure.
Categories of market capitalisation and investment approaches
Grasping market capitalisation necessitates categorising companies based on their magnitude and significance within the stock market. The principal categories encompass:
Large-cap: Characterised by sizable, well-established companies with a market capitalisation typically surpassing $10 billion. Notable examples encompass Apple, Microsoft, and Amazon.
Opting for large-cap companies proffers stability and incremental growth over time. Although short-term gains may be moderate, these companies frequently reward investors with consistent upticks in share value and dependable dividend disbursements.
Mid-cap: Encompassing companies with a market capitalisation ranging between $2 billion and $10 billion. Illustrative instances entail Etsy, Dropbox, and Duolingo.
Positioned between large and small caps, mid-cap companies represent established entities operating within sectors poised for accelerated growth. Despite presenting heightened risk due to their growth phase, mid-caps offer appealing prospects for investors seeking potential growth and expansion opportunities.
Small-cap: Encompassing companies with a market capitalisation below $2 billion, exemplified by Udemy, Getty Images, and Upwork.
Typically, small-cap companies, often younger or niche-focused, offer substantial growth prospects. Nevertheless, they are accompanied by escalated volatility and liquidity concerns, rendering them riskier investments. Nonetheless, their agility and potential for exponential growth render them enticing for investors possessing a higher risk tolerance and a long-term perspective.
The largest global companies by market cap 2023 source: Visual Capitalist
Market capitalisation and market indices
Market capitalisation forms the cornerstone of how market indices, such as the S&P 500, monitor market performance. Indices employ market cap-weighted methodologies, where larger companies wield greater influence, thereby implying that alterations in large-cap stocks significantly impact index movements.
Companies such as Apple, Microsoft, and Amazon, boasting substantial market caps, exert a pronounced influence on indices like the S&P 500. Consequently, if their market caps ascend, the index follows suit, reflecting a buoyant market sentiment.
Factors influencing market capitalisation
Market capitalisation, or market cap, is subject to an array of factors:
Company performance: Robust financial performance bolsters market cap, while undervalued shares may allure investors seeking growth prospects.
Investor sentiment: Positive developments elevate market cap, whereas adverse events can precipitate a downturn.
Industry trends: Flourishing industries tend to exhibit higher market caps, albeit market sentiment can instigate overvaluation or undervaluation of shares within these sectors.
Grasping these factors empowers investors to ascertain whether a company’s market cap accurately mirrors its intrinsic value and whether its shares are presently undervalued or overvalued.
In conclusion, market capitalisation emerges as a pivotal tool for investors and traders in navigating financial markets, furnishing insights into company size, stability, and growth potential, thereby guiding investment decisions and trading strategies. While market cap holds undeniable value, it is imperative to consider additional factors such as company performance and investor sentiment. By comprehending market cap’s significance and associated risks, traders can make well-informed decisions and efficaciously manage their portfolios for sustained success in finance.
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