Dear Client,

To provide our valued clients with an enhanced trading environment, VT Markets will adjust certain trading conditions for STP account on February 26, 2024:

Friendly reminder:

1. All account settings stay the same except for the above adjustments.

If you’d like more information, please don’t hesitate to contact [email protected].

CURRENCIES:

• Top of FormEuro’s Minor Decline: In a holiday-affected market, the Euro slightly dropped against the US Dollar.
• Persistent Downtrend: The Euro continues its year-long downtrend.
• Anticipation for German PMI: Market eyes are on Germany’s PMI data release this week, which could influence movement.
• US Market Closure: The US market was mostly inactive due to Presidents’ Day, with significant trading expected to resume later in the week.
• Upcoming Fed Minutes: Federal Reserve’s last meeting minutes are due Wednesday, potentially impacting market despite shifted rate-cut expectations to June.
• German Economic Indicator: Thursday’s German Purchasing Managers Index (PMI) is forecasted to show continued manufacturing contraction, potentially affecting the Euro.
• ECB’s Rate Decision: High interest rates remain as the European Central Bank (ECB) awaits clearer signs of inflation control, with no immediate rate cuts expected.

STOCK MARKET:

• Earnings: Barclays (BCS), Caesars Entertainment (CZR), Diamondback Energy (FANG), Home Depot (HD), KBR (KBR), Medtronic (MDT), Palo Alto Networks (PANW), Teladoc Health (TDOC), Toll Brothers (TOL), Walmart (WMT).
• Economic news: Philadelphia Fed Non-Manufacturing Activity, February (-3.7 previously); Leading index, January (-0.3% expected, -0.1% prior).
• Nvidia’s Earnings Report: Nvidia’s earnings, significant for its AI leadership, are set for release on Wednesday, marking a pivotal moment in a shortened trading week due to the Presidents’ Day holiday.
• Market Recovery and Performance: Despite a dip from an unexpected inflation report, the S&P 500 hit a record high, while the Dow Jones and Nasdaq experienced slight movements.
• Economic Data’s Impact: Recent CPI, PPI, and retail sales data have challenged the soft-landing narrative, affecting investor sentiment regarding Federal Reserve rate cuts.
• Investor Sentiment Shift: Expectations for the Fed’s interest rate cuts have been adjusted, with a June cut now more likely than earlier anticipated.
• Broader Market Outlook: Despite challenges, the overall market narrative remains unchanged, with AI stocks surging and a general expectation for policy recalibration within the year.

Start your CFD Shares Trading journey with VT Markets now!

Dear Client,

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].

With U.S. markets closed in observance of Presidents Day, global financial markets took center stage, showcasing mixed sentiments across different regions and sectors. Europe’s Stoxx 600 index saw a modest rebound, while Asian markets presented a mixed picture, influenced by the People’s Bank of China’s policy decisions and optimistic travel data from China. Meanwhile, the currency and commodity markets remained relatively stable, with minor movements in major currency pairs and commodities like gold seeing a slight rise. Key economic events, including policy decisions from the Reserve Bank of Australia and the People’s Bank of China, along with Canada’s CPI report, are highly anticipated by investors, potentially setting the tone for future market movements.

Stock Market Updates

The U.S. markets were closed on Monday in observance of Presidents Day, leading to a day where international markets garnered more attention. In Europe, the Stoxx 600 index managed a modest recovery, ending the day by 0.17%, a slight rebound from its negative performance in the morning session. Sector-wise, there was a mixed picture; mining stocks experienced a downturn, dropping by 1%, whereas healthcare stocks moved in the opposite direction, recording a gain of 0.95%. This divergence highlights the varied investor sentiments across different sectors within the European stock market landscape.

In company-specific news, shares of the Swiss software firm Temenos saw an impressive jump of 8.8%, bouncing back from the significant losses it suffered following a negative report from Hindenburg Research. On the other side of the globe, in the Asia-Pacific region, the stock market outcomes were mixed. Chinese markets showed optimism as traders returned from the Lunar New Year holidays, encouraged by promising travel data, while the Hong Kong stock market faced a downturn. The monetary policy stance of the People’s Bank of China, which held a key policy rate steady, also played a crucial role in shaping market expectations, especially in a global context where the timing of the U.S. Federal Reserve’s policy easing remains a focal point of speculation.

Data by Bloomberg

On Friday, the overall market saw a slight downturn, closing down by 0.48%. Despite the general negative sentiment, some sectors managed to post gains, with Materials leading the way with a 0.51% increase, followed by Health Care and Consumer Staples, which rose by 0.29% and 0.16%, respectively. On the flip side, the Communication Services sector faced the steepest decline at -1.56%, and Real Estate and Information Technology also experienced significant losses, dropping by -0.99% and -0.79% respectively. Other sectors such as Energy and Utilities saw marginal decreases, while Financials, Consumer Discretionary, and Industrials also ended the day in the red, highlighting a mixed but overall bearish performance across the market. Adding to the context, the US market was closed on Monday, suggesting that these movements were the last recorded before a day of inactivity in the trading sessions.

Currency Market Updates

In the recent currency market updates, major currency pairs have shown minimal movement, adhering to their familiar trading ranges, influenced by the holiday closures in the United States and Canada. Despite this lull, a cautious optimism permeated the financial markets, reflected in the performance of some European and Japanese stock indexes as they neared record highs. The Euro to US Dollar (EUR/USD) exchange rate remained just below the 1.0800 mark, while the British Pound to US Dollar (GBP/USD) hovered around 1.2600. The GBP gained momentum during the European trading session, although it saw a slight retreat before the day’s end. Meanwhile, the US Dollar saw modest gains against traditionally safe-haven currencies such as the Swiss Franc (CHF) and the Japanese Yen (JPY), hinting at a buoyant mood within the financial markets.

On the commodity front, the Australian Dollar recorded a slight increase against the US Dollar, with the AUD/USD pair trading near 0.6540. In contrast, the Canadian Dollar depreciated against its US counterpart, approaching the 1.3500 level. These movements come ahead of significant macroeconomic events slated for early this week. The Reserve Bank of Australia (RBA) is expected to release its Meeting Minutes, which market participants will scrutinize for indications on future monetary policy, especially concerning inflation control and rate adjustments. Additionally, the People’s Bank of China (PBoC) is set to announce its decision on interest rates, specifically the Loan Prime Rate (LPR), which could influence global financial sentiments. Meanwhile, Canada’s upcoming Consumer Price Index (CPI) report for January is anticipated to show a 0.4% month-over-month increase, potentially impacting the CAD’s performance. Furthermore, spot Gold has seen a rise for three consecutive days, briefly surpassing the $2,020.00 mark, adding another layer of complexity to the market dynamics as investors await these critical economic updates.

Picks of the Day Analysis

EUR/USD (4 Hours)

EUR/USD Sees Limited Movement Amid Quiet Macro Calendar and Mixed Market Sentiment

On Monday, the EUR/USD pair experienced limited investor engagement, ending the day with slight gains in the 1.0780 area, amidst a narrow trading range. The lack of significant macroeconomic data and the closure of US and Canadian markets contributed to the subdued activity. While the US dollar showed general weakness against a backdrop of mixed stock market performances, optimism in some Asian and European stock indexes did not translate into a clear direction for FX traders. The Euro’s muted response followed the Deutsche Bundesbank’s report suggesting a recession in Germany, attributed to weak demand and cautious investment. Looking ahead, a light macroeconomic calendar and anticipation for the Federal Open Market Committee (FOMC) meeting minutes release are likely to influence future trading dynamics, with the market seeking clues on monetary policy amidst recent inflation developments.

Chart EUR/USD by TradingView

On Monday, the EUR/USD moved in consolidation, fluctuating between the middle and upper bands of the Bollinger Bands. Currently, the price is moving slightly above the middle band, suggesting a potential slight upward movement to reach above the upper band. Notably, the Relative Strength Index (RSI) maintains its position at 52, signaling a neutral outlook for this currency pair.

Resistance: 1.0796, 1.0830

Support: 1.0745, 1.0713

XAU/USD (4 Hours)

XAU/USD Gains Amidst Dollar Weakness and Mixed Market Sentiments

In Monday’s trading session, Gold (XAU/USD) saw an uptick, advancing to $2,023.04 a troy ounce in the first half, driven by a diminishing demand for the US Dollar before settling around $2,016 after the Dollar regained some strength. The broader financial markets experienced subdued volatility, attributed to holidays in Canada and the US, and a light macroeconomic calendar. Despite this, Asian and European markets offered mixed signals, with Chinese stocks gaining post-holiday and the Nikkei 225 nearing record highs before closing lower. European markets ended mixed but close to record levels. The financial landscape is currently absorbing recent US inflation data, which exceeded expectations, reducing the likelihood of an imminent rate cut by the Fed, with markets eagerly awaiting the upcoming FOMC Meeting Minutes for further direction.

Chart XAU/USD by TradingView

On Monday, XAU/USD moved lower after reaching the upper band of the Bollinger Bands. Currently, the price is moving between the upper and middle bands, suggesting a potential downward movement toward the middle band. The Relative Strength Index (RSI) stands at 54, signaling a neutral outlook for this pair.

Resistance: $2,023, $2,038

Support: $2,010, $1,997

Economic Data

CURRENCIES:

Overview of Market Trends for the Week Ahead:

• US stock indices and gold prices recovered their losses following concerns over US inflation.
• Persistent inflation at the producer and consumer levels in the US didn’t deter the stock indices, which remained close to multi-year highs.

Inflation and Market Reactions:

• This week’s US inflation data drove Treasury yields and the US dollar up as markets adjusted expectations for US interest rate cuts.
• Above-expected US CPI and PPI figures boosted the US dollar, initially causing a decline in US indices. However, these effects were largely reversed by the week’s end, stabilizing most markets.

Market Volatility and Recovery:

• The VIX chart showed mid-week volatility with a significant rise post-US CPI announcement, which was later mitigated in the following days.
• Despite fluctuations, US indices closed the week near their recent highs.

International Market Performance:

• The FTSE 100 stood out by performing strongly against its global counterparts, supported by positive UK economic data and a slight rise in the US dollar, benefiting from the fact that around 70% of its company earnings are generated overseas.

STOCK MARKET:

• Goldman Sachs raises S&P 500 target to 5,200 due to profit expansion.
• The firm increased its forecast following the stock market surpassing the 5,000 milestone.
• This marks the second time Goldman Sachs has updated its S&P 500 target for 2024.
• The new target suggests a 3.9% increase from the current level, adjusting the forecast up from 5,100 to 5,200.
• Initially, Goldman Sachs predicted the S&P 500 would reach 4,700 by year-end.
• Goldman’s 5,200 target now aligns with optimistic projections from Wall Street analysts like Tom Lee and John Stoltzfus.
• The firm also revised its earnings-per-share forecast for the S&P 500, anticipating stronger growth in tech and communication sectors.
• Despite the upward revision, Goldman Sachs expects valuation multiples to stay near present levels, emphasizing earnings growth as the key to further gains.
• The S&P 500 has seen a 4.9% increase this year, driven by Federal Reserve policy shifts and AI-driven tech stock rallies.
• Wall Street peers, including Bank of America, consider raising their targets, suggesting the median S&P 500 forecast might be too conservative.
• Even bearish analysts like Morgan Stanley’s Michael Wilson acknowledge the potential for broader market gains, though Wilson’s target implies a potential decline.

Start your CFD Shares Trading journey with VT Markets now!

Dear Client,

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].

As we delve into the economic calendar for the upcoming week, several pivotal events and data releases promise to provide insight into the global economic landscape. From inflation figures to central bank deliberations and purchasing managers’ indices (PMIs), market participants will keenly watch these developments for signals regarding the direction of key economies. Here’s what to expect in the week ahead: 

February 20, 2024: Canadian Inflation Rate 

Canada’s annual inflation rate surged to 3.4% in December 2023, surpassing expectations and underscoring the persistent pressures on prices. The Bank of Canada had anticipated such an uptick, aligning with its outlook on inflation. Analysts now await the release of January 2024 data, scheduled for February 20, with expectations of a slight moderation to 3.2%. 

February 21, 2024: Australia Wage Price Index 

In Australia, the wage price index witnessed robust growth, reaching 4.0% year-on-year in Q3 2023, the highest level since Q1 2009. As data for Q4 2023 is set for release on February 21, analysts anticipate another uptick to 4.1%, indicative of sustained wage pressures. 

February 22, 2024: FOMC Meeting Minutes 

The minutes from the Federal Open Market Committee (FOMC) meeting in January 2024 will be scrutinized for insights into the Federal Reserve’s monetary policy stance. Despite maintaining the Fed funds rate at a 23-year peak of 5.25%-5.5% for the fourth consecutive meeting, Chair Powell hinted at the possibility of a rate reduction later in the year. However, the decision remains contingent upon evolving economic conditions, suggesting a cautious approach to policy adjustments. 

February 22, 2024: Flash Manufacturing PMI 

On the same day, flash manufacturing PMI figures for Germany, the UK, and the US will provide a snapshot of industrial activity. In January 2024, while Germany recorded a PMI of 45.5, the UK and the US posted figures of 47 and 50.7, respectively. Analysts anticipate slight improvements in the January 24, 2024, readings, with forecasts at 46.1 for Germany, 47.5 for the UK, and 50.1 for the US. 

February 22, 2024: Flash Services PMI 

Simultaneously, attention will be on the flash services PMI for the same countries. In January 2024, Germany witnessed a decline to 47.7, while the UK and the US saw expansions to 54.3 and 52.5, respectively. Projections for February 22, 2024, point to readings of 48 for Germany, 54.5 for the UK, and 52 for the US. 

As markets await these critical releases and events, investors and analysts alike remain vigilant, poised to interpret the data and its implications for economic trajectories and financial markets. The week ahead promises to offer valuable insights into the ongoing dynamics shaping the global economy. 

Imagine a time when a loaf of bread cost just a few cents, and a gallon of gas was a pocket-change purchase. Now, fast forward to today, where those same items can often dent our wallets significantly. 

This gradual increase in the price of goods and services over time is what economists term as inflation. It is a phenomenon that has been shaping economies and markets for centuries, and understanding its nuances is crucial for anyone looking to thrive in the world of forex trading. 

Understanding inflation 

Inflation, often dubbed the silent thief of purchasing power, is a widespread economic phenomenon impacting individuals, businesses, and entire nations. 

At its core, it denotes a sustained increase in the general price level of goods and services over time, resulting in a gradual rise in the cost of living and a decrease in the purchasing power of currency. 

While moderate inflation is deemed a natural aspect of healthy economic growth, excessive inflation can undermine purchasing power, disrupt economic stability, and impede long-term prosperity. 

Understanding the drivers behind inflation is crucial. They include: 

• ^{Demand-pull inflation: results from demand exceeding supply due to factors like consumer spending and policy changes.} 
• ^{Cost-push inflation: arises from increased production costs passed on to consumers.} 
• ^{Monetary factors: central bank actions, such as interest rate adjustments, impacting inflation.} 
• ^{Supply chain disruptions: global issues causing shortages and price hikes.} 
• ^{Expectations and psychology: influence behaviour, affecting inflation outcomes.} 

Types of inflation 

Inflation manifests in various forms, each with distinct characteristics and underlying causes: 

1. Creeping inflation: Characterised by a slow and gradual rise in prices, creeping inflation is typically associated with stable economic conditions and moderate inflation rates. 

2. Walking inflation: Walking inflation refers to a slightly faster pace of price increases compared to creeping inflation but remains manageable and does not pose significant economic risks. 

3. Galloping inflation: Galloping inflation represents a rapid acceleration in price levels, often reaching double-digit or triple-digit inflation rates. It can erode purchasing power rapidly, disrupt economic stability, and undermine confidence in the currency. 

4. Hyperinflation: Hyperinflation is the most extreme form of inflation, characterised by astronomical inflation rates, often exceeding 50% per month. It results in the complete breakdown of the monetary system, rendering the currency worthless and causing severe social and economic upheaval. 

How inflation affects currency values 

Understanding how inflation affects currency values is essential for forex traders. 

As inflation rises, a currency’s value typically decreases due to the erosion of its purchasing power. This decreased attractiveness prompts investors to seek higher returns, leading to a decline in the currency’s value. 

Conversely, currencies from nations with low inflation or stable prices often see increased demand, which strengthens their value against others. 

However, this relationship is not always straightforward, as a range of factors like interest rates, economic growth prospects, geopolitical events, and market sentiment can also influence exchange rates. 

Role of Central Banks in managing inflation 

Central banks play a vital role in managing inflation through monetary policy tools like interest rates, open market operations, and forward guidance. 

Inflation targeting frameworks, where central banks set explicit targets, are widespread in many countries. 

For forex traders, monitoring central bank decisions is crucial; using tools like the Economic calendar helps anticipate and react to actions swiftly. 

Hawkish policies, like interest rate hikes, strengthen a currency, while dovish measures, aiming to stimulate growth, may lead to depreciation as investors seek higher returns elsewhere. 

Indicators and metrics to monitor inflation 

Inflation serves as a vital gauge of economic health, influencing policy decisions and investment strategies. 

Consumer Price Index (CPI) 

CPI tracks changes in household goods and services prices, indicating consumer inflation. Higher CPI signals rising inflationary pressures, potentially leading to currency depreciation. 

Producer Price Index (PPI) 

PPI tracks changes in producer prices, reflecting upstream inflation trends. Rising production costs may translate into consumer price hikes and inflationary pressures. 

Core vs Headline Inflation 

Core inflation excludes volatile items like food and energy, offering a stable measure of underlying inflation trends. Comparing core to headline inflation helps filter out temporary fluctuations. 

Other Economic Indicators 

Monitoring unemployment rates and GDP (Gross Domestic Product) growth provides insights into inflationary pressures and broader economic conditions. High unemployment may dampen wage pressures and inflation, while strong GDP growth may signal inflationary tendencies. 

By analysing these indicators, forex traders gain a comprehensive view of inflation trends and their impact on currency values. 

Strategies for Trading in an Inflationary Environment 

Adapting to inflationary shifts in the forex market requires strategic manoeuvres. Here are concise strategies for traders: 

• Stay informed about inflation across economies, analysing data releases and central bank announcements for accurate trend anticipation. 
• Incorporate CPI, PPI, and core inflation into fundamental analysis for insights into economic health and currency values. 
• Mitigate risks by adapting strategies: adjust position sizes, set stop-loss levels, and diversify portfolios for effective risk management. 
• Hedge against inflation by strategically positioning in currencies and assets poised to appreciate, such as those from countries with strong inflation-fighting policies or inflation-resistant currencies like gold. 

Implementing these streamlined strategies enables forex traders to navigate the complexities of an inflationary market with precision and confidence. 

In conclusion, navigating forex trading in an inflationary landscape requires a nuanced understanding of how inflation impacts currency values. 

By recognising the relationship between inflation and currency dynamics, utilising key indicators, and implementing strategic approaches, traders can effectively navigate the challenges and opportunities presented by inflation in the forex market. 

Stay informed, stay adaptable, and integrate inflation analysis into your trading strategies to enhance your chances of success in the dynamic world of forex trading. 

Dear Client,

To provide you with more diverse trading options, VT Markets will launch 6 new ETF products on 20th Feb 2024.

You can now trade the world’s popular products on Meta Trader 4 and 5 with the following specifications:

The above data is for reference only, please refer to the MT4 and MT5 platforms for the updated data.

If you’d like more information, please don’t hesitate to contact [email protected].

CURRENCIES:

Gold Prices Recovery

• Recent Surge: Gold prices climbed back above the crucial $2,000 mark, driven by a weaker U.S. dollar and lower Treasury yields following disappointing U.S. economic data.

Economic Data Impact

• Retail Sales Data: January’s U.S. retail sales showed a 0.8% decrease, signaling a potential slowdown in household consumption, contrary to the expected 0.1% decline.

Federal Reserve’s Policy Dilemma

• Inflation Concerns: Despite weak consumer spending, the Fed’s decision-making is complicated by inflation rates exceeding the 2.0% target, showing significant persistence.

Upcoming PPI Report

• Key Indicator: The U.S. Producer Price Index (PPI) for January is anticipated, with expectations of a decrease to 0.6% year-on-year. This data is crucial for forecasting the Fed’s moves and gold’s future price direction.

Implications for Gold Prices

• Potential Outcomes: A subdued PPI may favor gold prices, while an unexpected increase, similar to recent CPI data, could lead to higher yields and a stronger dollar, negatively impacting gold.

STOCK MARKET:

• Record-Breaking S&P 500: The S&P 500 hit a new all-time high, showcasing the market’s strong recovery from recent setbacks, with a notable increase of nearly 0.6%.
• Dow Jones and Nasdaq Gains: The Dow Jones Industrial Average rose by 0.9%, adding almost 350 points, while the Nasdaq Composite grew by 0.3%, indicating widespread market optimism.
• Overcoming Inflation Concerns: Despite initial market turbulence following a report of higher-than-expected inflation, comments from Federal Reserve officials have helped to calm market fears, contributing to the recovery.
• Retail Sales Impact: January’s retail sales dropped by 0.8%, sparking debates about consumer spending resilience and the possibility of the U.S. economy achieving a “soft landing” amidst inflationary pressures.
• Market Resilience: The recent market rebound, following a sharp drop, underscores the underlying strength and resilience of the stock market, despite concerns about potential economic slowdowns and the effects of inflation.

Start your CFD Shares Trading journey with VT Markets now!