On Tuesday, we witnessed another cautious and quiet session on the US stock market. The results of the stock indices were mixed; Dow Jones slightly decreased but the S&P500 and Nasdaq Composite ended the day on moderate gains. This morning, the EUR/USD rate is moving down towards 1.0815 following yesterday’s high of around 1.0865. Bitcoin continues its rally, gaining around 15% since the start of the week. The NZD weakened following the RBNZ’s decision. From macro data, we received a poorer result of the Conference Board Consumer Confidence Index. Investors are waiting for tomorrow’s release of the report on US spending.
The market continues to retreat from its optimistic assumptions about quick interest rate cuts by the Fed. The current valuation is close to the Federal Reserve’s projections from December when new projections and the “dot plot” were presented. The probability of reducing the cost of money in June fell to around 54%. March is completely dismissed, and the chance of changes in monetary policy parameters in May is less than 20%.
US Treasury Secretary Janet Yellen emphasized the role of the United States, stating that “the American path to a soft landing supports global growth”. She spoke about threats to prospects, including prolonging conflicts in Ukraine and the Middle East that could raise commodity prices and disrupt supply chains, and debt problems in some countries.
From data, we received the Conference Board Consumer Confidence Index, which fell to 106.7 points (consensus 115), and the January one was revised down to 110.9 from 114.8 points. The regional Richmond Fed index for the industry was less negative than expected and was -5 points (forecast -9 points) compared to -15 points previously. Durable goods orders also fared poorly (-6.1% m/m), and those excluding transport fell by 0.3% m/m. Today we will know the second estimate of US GDP for the fourth quarter. The market consensus assumes an unchanged reading of 3.3% q/q in annualized terms.
The RBNZ left interest rates unchanged overnight (5.5%). However, the tone of the statement was dovish as policymakers stated that the risk to inflation outlook has become more balanced. The market to some extent had previously expected that the central bank might opt for another increase. Now such a scenario has become unlikely and thus the NZD lost in value. The NZD/USD pair fell to around 0.61 from 0.6175 before the decision.
The EUR/USD rate continues its decline this morning and is heading towards horizontal support at 1.08. Gold is still within the upper limit of the downtrend channel, where it has been since the end of 2023.
Today the price of the main cryptocurrency increases again dynamically. The increase reaches 2.6%, and since the start of the week, it is almost 15%. The CFD contract based on bitcoin is the most expensive since November 2023. Remember that this year there will be halving – the process of reducing rewards for miners mining new cryptocurrencies. In January, the US Securities and Exchange Commission (SEC) approved the first ETF based on bitcoin.
Article by Łukasz Zembik, Oanda TMS Brokers.
