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Forex Market Analysis: Dollar and Tesla 25 Jan 2024

January 25, 2024

Forex Markets Analysis: 25 Jan 2024

CURRENCIES:

  • U.S. Dollar faced a decline despite positive economic data on Wednesday
  • Potential for a reversal in the dollar’s fortunes in the upcoming days
  • Market attention shifts to the fourth-quarter U.S. GDP report

U.S. Dollar Technical Outlook:

  • Analysis focuses on three major FX pairs: EUR/USD, USD/JPY, and GBP/USD
  • Despite better-than-expected PMI results, the dollar retreated
  • Possibility of a turnaround if key economic data continues to surprise positively

Fourth-Quarter U.S. GDP Report:

  • Scheduled for release on Thursday
  • Forecasted economic activity expansion of 2% at an annualized rate
  • GDP considered backward-looking but provides insights into economic health

Key Points to Monitor:

  • Close attention to household expenditures, a significant growth engine
  • Consumer spending remains robust, contributing to a positive GDP outlook
  • A strong GDP report could impact expectations of a Fed rate cut in March

Implications for the U.S. Dollar:

  • Positive GDP scenario may reduce odds of a Fed rate cut
  • Traders could adjust dovish expectations for the FOMC’s policy path
  • Potential for a more favorable backdrop for the U.S. dollar

STOCK MARKET:

Tesla Q4 Earnings Overview:

  • Stock drops due to earnings miss and a cautious full-year production outlook
  • CEO Elon Musk confirms the launch of the company’s next-gen vehicle in H2 2025

Financial Performance in Q4:

  • Top-line revenue of $25.17 billion, slightly below the estimated $25.87 billion
  • Revenue increased by approximately 3% compared to the previous year
  • Adjusted EPS at $0.71, missing the estimated $0.73
  • Adjusted net income of $2.486 billion, falling short of the $2.61 billion expected by the Street

Full-Year Production Outlook:

  • Tesla anticipates a notably lower vehicle volume growth rate compared to 2023
  • Launch of the next-gen vehicle at Gigafactory Texas cited as a reason for the production slowdown
  • Unlikely to meet Street estimates of 2.19 million vehicle production for 2024, signaling a 21% increase from 2023

Next-Gen Vehicle and Production Plans:

  • Progress on the next-gen platform highlighted in the earnings release
  • Musk emphasizes the revolutionary manufacturing system for the low-cost vehicle
  • Production of the next-gen vehicle scheduled for the second half of 2025

Factors Contributing to Profitability Drop:

  • Downward pressure on margins due to cost-cutting efforts initiated in late 2022
  • Q4 gross margin at 17.6%, below the estimated 18.1% and a decline from the previous year
  • Various challenges, including Hertz shedding EVs, price cuts in China, production halt in Berlin, and Musk’s stock demand, impacting profitability

Delivery and Production Statistics:

  • Q4 deliveries surpass Street estimates with 484,507 deliveries
  • All-time record quarter for Tesla, beating the previous record of 466,000 units in Q2 of the last year
  • Yearly vehicle deliveries grow by 38% to 1.81 million, production increases by 35% to 1.85 million

Cybertruck and Musk’s Concerns:

  • Cybertruck deliveries not specified, but demand described as “off the hook”
  • Musk addresses concerns about securing greater control for AI ambitions, citing potential loss of influence in the future
  • Expresses worries about being voted out by shareholder advisory firms like ISS and Glass Lewis

Elon Musk’s Recent Activities:

  • Speaks at a symposium about antisemitism in Krakow, Poland, on January 22, 2024
  • Highlights his desire to be an effective steward of powerful technology, expressing concerns about potential loss of control due to shareholder decisions.