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Forex Market Analysis: USD Strength Surges, Inflation Anticipation, S&P 500 Hits Record Highs

February 12, 2024
CURRENCIES:
  • Gold Price Trends: Gold prices declined due to an increase in U.S. Treasury yields and a stronger U.S. dollar.
  • Currency Market Movements: The EUR/USD and GBP/USD experienced slight drops but remained above critical technical levels.
  • Anticipation of U.S. Inflation Data: The upcoming U.S. inflation report is expected to significantly influence market volatility in the following week.
  • Stock Market Performance: Despite the pressure from rising bond yields, U.S. stocks, including the S&P 500 and Nasdaq 100, achieved record highs.
  • U.S. Dollar Strength: The U.S. dollar has been on an upward trend for four weeks, affecting currency pairs like EUR/USD, GBP/USD, and leading to a notable rally in USD/JPY.
  • Potential Market Reactions to CPI Report: The January inflation data release could lead to substantial market fluctuations, with traders advised to brace for potential sharp price movements.
  • Impact of Inflation on Markets: An inflation rate exceeding expectations could boost U.S. yields and the dollar but negatively affect stocks and gold. Conversely, lower-than-expected inflation figures might decrease yields, weaken the dollar, and support equities and gold prices in the short term.
STOCK MARKET:
  • Economic data: New York Fed one-year inflation expectations, January (3.01% previously)
  • Earnings: Avis Budget Group (CAR), Monday.com (MNDY), Waste Management (WM), Zoominfo Technologies (ZI)
  • Key Market Indicators: Inflation, retail sales, and corporate earnings are pivotal factors for the market this week.
  • S&P 500 Milestone: The S&P 500 surpassed the 5,000 mark for the first time, continuing a positive trend seen in recent weeks.
  • Corporate Earnings Reports: About 15% of S&P 500 companies, including John Deere, Coinbase, Airbnb, and Shopify, are scheduled to report their earnings.
  • Inflation Expectations: The Consumer Price Index (CPI) for January is anticipated, with an expected annual gain of 2.9%, signaling a decrease from December’s 3.4%.
  • Core Inflation Forecast: Excluding food and energy, core inflation is projected to have risen by 3.7% year-over-year, with a monthly increase of 0.3%.
  • Consumer Spending Outlook: January’s retail sales report is awaited, with an expected 0.2% decline from the previous month, influenced by seasonal factors and weather disruptions.
  • Automotive Industry Earnings: Stellantis is set to report its earnings, with attention on its performance and electric vehicle (EV) strategy following positive surprises from Ford and GM.
  • Earnings Performance: So far, 75% of S&P 500 companies have reported earnings, showing a trend towards the second consecutive quarter of earnings growth.
  • Analyst Insights: High earnings beat rates among U.S. companies suggest strong market performance, with expectations of continued earnings growth over the next two years.