Is the dollar finally falling?

Is the dollar finally falling?
  • Corporate Earnings news
  • Global market indices
  • Currencies
  • Cryptocurrencies
  • Fixed Income
  • Commodity sector news
  • Key data to move markets this week
  • Global macro updates

Corporate Earnings News

Corporate earning calendar 13 July - 20 July 2023

Thursday: Delta Airlines, Pepsico
Friday: BlackRock, JPMorgan Chase & Co., State Street, UnitedHealth, Wells Fargo 
Tuesday: Bank of New York Mellon, Morgan Stanley, Bank of America, Novartis, Charles Schwab, PNC Financial Services
Wednesday: Netflix, Tesla, IBM, Goldman Sachs, Baker Hughes, Crown Castle, Halliburton, Discover Financial Services, Equifax
ThursdayCapital One Financial Corp., Blackstone, CSX Corp., Freeport-McMoRan, Johnson & Johnson, Newmont Corporation, Philip Morris International, Intuitive Surgical, Capital One Financial Corp.

US Stock Indices 

Nasdaq 100 +0.81% MTD and +39.87% YTD 
Dow Jones Industrial Average -0.42% MTD and +3.36% YTD 
NYSE +0.85% MTD and +5.45% YTD 
S&P 500 -0.25% MTD and +15.62% YTD 

US stocks rallied after inflation fell more than expected in June, easing pressure on the Federal Reserve to keep raising interest rates.

Mega caps: A very mixed week for mega caps with Alphabet, Apple, Microsoft, and Tesla all down. Amazon is relatively flat, while Meta Platforms and Nvidia are up.

The US Federal Trade Commission (FTC) said on Wednesday it was appealing a federal judge's ruling that Microsoft could go forward with its $69 billion purchase of Activision Blizzard. Meanwhile, the UK’s Competition and Market Authority (CMA) has said that it would consider a restructured deal between Microsoft and Activision Blizzard.

Meta Platforms contested EU antitrust charges at a closed hearing on Thursday. The European Commission has said that Meta abused its market power by tying its online classified ads service Facebook Marketplace with its social network. It also said Meta imposed unfair trading conditions on rival online classified ads services which advertise on Facebook or Instagram.

Energy stocks had a good week as oil advanced on Chinese promises to support the economy. Apa Corp (US), ConocoPhillips, Chevron, Marathon Petroleum, Chevron, Phillips 66, Occidental Petroleum, Energy Fuels, Shell,Halliburton, and Baker Hughes are all up.

Materials and Mining stocks benefited this week as the USD’s fall helped copper prices reach their highest in three weeks, iron ore rallied, and aluminium, zinc and lead all rose. Albemarle Corporation, Mosaic, Newmont Mining, CF Industries Holdings, Yara International, Nucor Corporation, Freeport-McMoran, DuPont de Nemours Inc. and Sibanye Stillwater are all up.

European Stock Indices 

Stoxx 600 -0.73% MTD and +7.92% YTD
DAX -0.77% MTD and +15.08% YTD 
CAC 40 -0.91% MTD and +13.27% YTD 
IBEX 35 -1.45% MTD and +14.88% YTD 
FTSE MIB +1.14% MTD and +20.44% YTD
FTSE 100 -1.53% MTD and -0.48% YTD 

Other Global Stock Indices 

MSCI World Index -0.46% MTD and +13.46% YTD
Hang Seng -0.29% MTD and -4.65% YTD

Currencies

The USD continued its almost six weeks long slide with its worst session on Wednesday following the release of CPI data. The GBP is +7.34% YTD against the USD with Sterling rising to its highest level against the dollar in 15 months as the BoE looks likely to continue raising rates for the foreseeable future. The EUR is +4.01% YTD against the USD and at its highest level in a year against the dollar on expectations of a further rate rise in July. However, the risk remains that the Fed may keep rates higher for longer if inflation does not fall back within its target. And despite its weakening, it still remains the world’s reserve currency. As such it may strengthen due to geopolitical risk aversion, especially following NATO’s new agreement to increase assistance to Ukraine and rising tensions between the US and allies with China. 

Cryptocurrencies

Bitcoin +11.93% MTD and +83.10% YTD
Ethereum +0.33% MTD and +56.21% YTD

Bitcoin has continued to benefit from the applications to the SEC by Wall Street big names BlackRock, Fidelity, and Invesco for Bitcoin ETFs. These applications may be driven, according to Bloomberg news, by the increasing likelihood of the SEC being forced to allow a spot Bitcoin ETF. 

Fixed Income

US 10-year yield to 3.86%.
German 10-year yield to 2.58%.
UK 10-year yield to 4.51%.

Bond yields fell this week on expectations that the Fed is near its final rate rise. Although the ECB is likely to continue to raise rates again as core inflation remains stubbornly high due to wage price pressures, several ECB policymakers have stated that Money markets are pricing in that the BoE's benchmark rate will peak at 6.3% in March 2024.

Commodities

Gold futures to $1,963.50 an ounce.
Silver futures to $24.11 per ounce.
West Texas Intermediate crude to $75.75 a barrel.
Brent crude to $80.01 a barrel.

Gold prices climbed this week on a weaker USD and falling bond yields as investors are increasingly expecting that the Fed will reach its peak rate at this month’s meeting. According to the World Gold Council, gold increased by 5.4% in the first half of 2023. As global central banks appear to be closer to their peaks, gold is likely to remain range bound despite support from central bank purchases and geopolitical event hedging.

Global benchmark Brent reached $80 on Wednesday, the highest level since May. Forecasts from the US Energy Information Administration (EIA) and the International Energy Agency (IEA) are for the market to tighten into 2024. The IEA said today that world fuel consumption will increase by 2.2 million barrels a day — or about 2% — in 2023, a reduction of about 220,000 barrels from last month’s forecast. However, supplies have been at their highest level in almost two years due to Iran and the US despite cuts by OPEC+ countries, particularly Saudi Arabia. 

Note: As of 5 pm EDT 12 July 2023

Key data to move markets this week

EUROPE 

Thursday: European Council releases Economic Growth Forecast, Eurozone Industrial Production, ECB Monetary Policy Accounts. 
Friday: EcoFin Meeting.
Monday: German Bundesbank Monthly Report.
Wednesday: Core Harmonised Index of Consumer Prices.
Thursday: German PPI and Eurozone Consumer Confidence.

UK

Thursday: GDP, Industrial Production and Manufacturing Production.
Wednesday: CPI, RPI, and PPI.
Thursday: Gfk Consumer Confidence.

US

Thursday: Initial jobless claims, Continuing jobless claims, PPI and a speech by Fed Board of Governors member Christopher Waller.
Friday: Michigan Consumer Sentiment Index, and UoM 5-year Consumer Inflation Expectation.
Monday: New York State Manufacturing Index.
Tuesday: Retail Sales and Industrial Production.
Wednesday: Building Permits, Housing Starts.
Thursday: Initial jobless claims, Continuing jobless claims, Philadelphia Fed Manufacturing Survey, Existing Homes Sales Change.

CHINA

Friday: Import and Export data.
Monday: GDP, Industrial Production and Retail Sales. 
Thursday: PBoC Interest Rate Decision. 

Global Macro Updates

A final push for the Fed? CPI came in at an annual rate of 3% in June, the lowest reading since March 2021. Core inflation eased to 4.8% from 5.3% in May, with the drop being the largest in more than three years. US consumer prices registered their smallest annual increase in more than two years, with the CPI rising 0.2% last month for an annual gain of 3.0%. Core CPI increased 0.2% in the month, the first time in six months that it did not post monthly gains of at least 0.4%. In the 12 months through June, the core CPI rose 4.8%. Fed officials previously indicated that they expect to hike rates by another 50 bps this year. However, although markets are still expecting a 25 bps rise in the July meeting, traders seem to be expecting another pause with the rate staying between 5.25-5.50%% for an extended period.

Is the ECB near its peak? There seems to be some support from ECB policymakers that the ECB can start to consider pausing, if not holding rates, after another rate rise this month. According to Bank of Italy governor Ignazio Visco in an interview with Italy’s SKy TG24, the ECB is "not very far" from a peak in interest rates. Visco repeated his view that it will take time for the impact of rate rises to feed through into the fight against inflation. This sentiment was echoed by Croatian Central Bank President Boris Vujcic this week when he said that "Inflation risks across the euro zone are getting more balanced than they used to be." He confirmed that the ECB is likely to raise rates later this month. However, ECB Vice President Luis De Guindos has said that although most indicators have started to show softening, inflation remained far too high so the ECB’s job was not done yet.

Is Britain really coping? "The UK economy and financial system has so far been resilient to interest rate risk," BoE Governor Andrew Bailey told a press conference. "We will continue to monitor credit conditions for any signs of tightening which are not explained satisfactorily by changes in the macroeconomic outlook." However, he did note that the full impact of higher interest rates has not been felt yet. According to stress tests, the UK’s eight largest banks all have enough capital to cope with higher interest rates. The BoE saw risks in global commercial real estate and from corporate borrowing in the private credit and leveraged lending sectors. 

For consumers coping is proving to be more of a challenge. Inflation was running at 8.7% in May, and although wages rose 7.3% in the three months to May, unemployment rose to 4%. GDP has also contracted, falling 0.1% in May from April, following growth of 0.2% in the previous month. All sectors of the economy contracted in May with the exception of services, which showed no growth. Mortgage rates have risen to the highest levels since 2008 with the average rate of a two-year fixed residential mortgage increasing to 6.66%. Swap rates, also a key measure used by lenders to determine the mortgage borrowing costs, also rose, up by 0.89% through June, according to Reuters.

Crypto scams falling? According to blockchain intelligence firm Chainalysis, cryptocurrency scams have fallen by 77% from $3.3 billion to $1.1 billion over the first six months of 2023. However, as noted by Cointelegraph.com, according to a 30 June report by Web3 security firm Beosin, the total value of cryptocurrencies lost in scams, hacks and rug pulls amounted to $656 million during the first half of 2023. This includes the loss of $471.43 million in 108 protocol attacks, $108 million in various phishing scams and $75.87 million over 110 rug pulls. For hacks, the amount represented a significant decrease over H1 2022 and H2 2022, where $1.91 billion and $1.69 billion were lost, respectively. It said the overwhelming majority of crypto lost, 75.6%, in the first half of 2023 were coins and tokens minted on the Ethereum blockchain and that this mostly due to to smart contract vulnerabilities (56%), while 21.4% had no clear identifiable reasons for the loss. Nevertheless, the numbers represent a significant decrease over H2 2021, when a record $2.1 billion in crypto was lost due to hacks, phishing scams and rug pulls. 

DISCLAIMER: While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

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