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Markets Continue to Adjust The Fed’s Future Rate Path, Triggering Volatility

47

Stocks fall as investors remain cautious of a strong indication of a hawkish Pivot from the Federal Reserve.
Economists expect the Federal Reserve to indicate a delayed rate adjustment and less rate cuts in 2024.
Gold declines 2.12% on Tuesday and the US Dollar increases close to a new 2024 high.
Amazon, the 5th most influential stock for the NASDAQ, beats earnings expectations, but a “risk-off” sentiment minimizes gains.

EURUSD – The US Dollar Index Close to 2024’s All-Time Highs!

The EURUSD is trading considerably lower for a second consecutive day due to the strengthening US Dollar. However, investors should note that the Euro is also weakening against most currencies including the AUD, CAD and NZD. The exchange rate is currently trading 0.10% lower while the US Dollar Index is 0.20% higher.

Yesterday began the two-day meeting of the US Federal Open Market Committee about its monetary policy. Analysts expect the interest rate to remain at 5.50% but will closely monitor the accompanying statements by officials and the press conference of the head of the regulator, Jerome Powell. The rate decision announced tonight will be less important, instead investors will focus on the statement and Press Conference. The Fed Chairman’s Press Conference will take place at 18:30 GMT.

The US Dollar is considerably increasing in value as investors expect the committee to take a more hawkish approach. This is due to US inflation rising to 3.5%, the highest since September 2023 and the US Unemployment Rate remaining firmly below 4.00%. The future performance of the US Dollar will depend on how hawkish the Federal Reserve will be in tonight’s meeting. If the Fed advises they still believe 3 rate cuts are appropriate, the Dollar may decline due to being wrongly priced. However, if the regulator indicates less adjustments and no cuts over the summer months, the higher price will be justified.

Bond Yields trade 0.002% higher and could continue to support the Dollar if yields continue to rise. The CME Fed Tool continues to paint a more hawkish picture. According to the CME, an interest rate cut in September is now almost a 50/50 possibility. Whereas, last week saw it as the likely outcome.

The Euro on the other hand has seen positive economic data over the past 24 hours including higher Preliminary GDP growth from most Members and higher CPI Estimates. German GDP growth read 0.2%, the highest since 2022. French, Spanish and Italian GDP Growth Rates also showed much needed growth within the Eurozone. However, so far, the price continues to be overpowered by the expected Fed’s hawkish stance. Investors fear the Federal Reserve will be incapable of adjusting, while the European Central Bank will cut on at least one occasion.

USA100 – Amazon Beat Earnings Expectations But Pressured by Low Sentiment Towards Stocks!

The NASDAQ fell more than 2% for the first time in 2024, again largely due to the Fed. The top 30 most influential stocks within the NASDAQ declined during yesterday’s trading sessions and only 9% of the components ended the day higher. Technical analysis is currently indicating a potential downward price movement, but this will also depend on the Fed’s approach this evening.

Some positive news does remain with Amazon beating their Earnings Per Share expectations by 33%. Amazon confirmed strong cloud sales due to rising AI demand, but forecasts for the upcoming quarters fell slightly short. Even though the quarterly earnings report is deemed mainly positive, the stock only rose 1.30% due to its forward guidance and the low investor sentiment towards stocks.

Michalis Efthymiou

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

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