We are still in risk-off mode in the market driven by technology stocks. The main US S&P 500 index remains 3.9 per cent below its peaks and the tech Nasdaq 100 has slid 8.7 per cent. Negative sentiment may be dampened by data from recent reports from the major tech giants. All beat analysts' expectations. Microsoft reported a 10 per cent increase in net profit, Meta Platforms (formerly Facebook) a 73 per cent increase, Apple gained 11 per cent and Amazon 101 per cent over last year. Hence, the current declines in the indices appear to be a profit realisation by the big players in relation to company performance, rather than a deteriorating business situation. The situation is much worse overseas. Japan's Nikkei 225 index has plunged by as much as 15.2% in less than three weeks due to the significant strengthening of the yen. The USD/JPY exchange rate fell by 8 per cent in that time, as the Bank of Japan raised interest rates to 0.25 per cent, to the highest level in 16 years. The yen's strengthening is hurting Japanese export companies, which have previously benefited from a relatively weak currency. If the yen continues to strengthen, this could reverse the upward trend in the Japanese market, but the current strengthening of the JPY may be temporary. In the coming week, we will learn about the central bank of Australia's interest rate decision, US unemployment claims data and the German inflation rate.
Table of contents:
- Interest rate decision in Australia
- Preliminary number of applications for unemployment benefits in the United States
- German consumer price index (CPI) annualised (July)
Tuesday, 6.08, 6:30 CET, interest rate decision in Australia
Australia's central bank kept interest rates at 4.35 per cent at its June meeting. Inflation in Australia remains elevated at 3.8 per cent. However, the economy is cooling significantly as GDP growth has slowed to 1.1 per cent year-on-year compared to previous levels around 4 per cent. The labour market situation has also deteriorated over the past year. The unemployment rate has risen to 4.1 per cent from 3.5 per cent a year earlier, putting pressure on possible earlier interest rate cuts.
Analysts' forecast is for interest rates to remain at 4.35 per cent.
Source: Tradingeconomics.com
A higher-than-expected interest rate could be bullish for AUD, while a lower-than-expected interest rate could act bearishly on AUD.
Impact: AUD/USD, EUR/AUD
Thursday, 8.08, 14:30 CET, preliminary number of applications for unemployment benefits in the United States
The number of US unemployment claims rose to 249,000 in the week ending 27 July. This is the highest reading in a year. This increase, along with other indicators, suggests a weakening labour market, intensifying expectations for a September interest rate cut by the Federal Reserve.
The current analyst forecast is for a reading of 247,000 claims.
Source: Tradingeconomics.com
A higher-than-expected reading could be bearish for the USD, while a lower-than-expected reading could act bullishly on the USD.
Impact: EUR/USD, USD/PLN
Friday, 9.08, 8:00 CET, German consumer price index (CPI) annualised (July)
Annual inflation in Germany unexpectedly rose to 2.3 per cent in July 2024, up from 2.2 per cent in June, despite forecasts that price dynamics would remain stable. The increase was mainly in food, with energy costs falling more slowly than in the previous month.
Analysts' current forecast is for inflation to remain at 2.3 per cent.
Source: Tradingeconomics.com
A higher-than-expected reading could be bullish for the EUR, while a lower-than-expected reading could act bearishly on the EUR.
Impact: EUR/USD, EUR/PLN
Grzegorz Dróżdż, CAI MPW, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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