🔥 Premium AI-powered Stock Picks from InvestingPro Now up to 50% OffCLAIM SALE

Stocks Unaffected by Powell’s Mixed Tone, Euro on the Rise

Published 07/10/2024, 04:41 AM
  • US stocks rally continues after Chairman Powell’s comments

  • French developments and ECB doves keep euro in check

  • China reacts to bond market rally, but real issues persist

  • Kiwi under pressure as RNBZ turns dovish

US Stocks Rally Despite Powell’s Lack of Dovish Shift

Fed Chairman Powell kept the cards close to his chest regarding the timing of the much-expected rate cut at yesterday’s Senate testimony, but he managed to satisfy the Fed doves by stating that considerable progress has been made towards the 2% inflation goal.

Despite expectations for a more dovish stance, following last week’s weak US labor market data, US stock indices managed to record new all-time highs. Barring a major surprise and after reflecting on the market's reaction, Powell will likely repeat his comments in today’s testimony at the House of Representatives. With the market already looking ahead to tomorrow’s CPI report, three Fed speakers will be on the wires today.

Bowman, Goolsbee, and Cook are unlikely to agree upon the next set of actions by the Fed as they belong to different camps, but the market will probably pay more attention to any dovish commentary.

Daily Performance

Euro Survives the French Uncertainty

With the euro managing to maintain its recent gains against the US dollar, the behind-the-door discussions for the formation of the new French government continue. The current prime minister remains as a caretaker, predominantly to ensure that the 33rd Summer Olympic Games are hosted without major issues.

In the meantime, ECB doves continue to push for rate cuts. The ECB’s Panetta appeared confident that everything is progressing towards another rate reduction, while Centeno did not surprise by talking again about “a few more rate cuts this year” as growth is below potential.

The Bundesbank’s Nagel struck a more conciliatory tone, but his comment that “we don’t lower interest rates on autopilot” just confirmed that the battle for a September rate cut remains at large.

Nagel is scheduled to speak later today, and it would be interesting to hear any comments on the euro area wage rises jumping in June, according to one data source.

China’s Problems Multiply

China’s CPI and PPI managed to surprise on the downside today, with the latter pointing to some inflationary pressures down the line. However, the market is still digesting Monday’s announcement regarding the PBoC’s intention to use repos and reverse repos to manage liquidity.

This is a common way of managing liquidity in the banking system, but China’s problems are mostly economic and, more specifically, the ailing housing sector.

Interestingly, the third plenary session of the 20th Communist Party of China (CPC) Central Committee will be held on July 15–18. This session will most likely gain valuable press time as the market speculates that further support measures for the housing sector, on top of the May 2024 decisions, could be announced.

RBNZ Turns Dovish

The kiwi is on the back foot today against the dollar as the RBNZ managed to turn more dovish than most market participants expected. This is a significant shift from the May meeting, when the RBNZ kept the rate hike option on the table.

There was no press conference or projections published today, but it looks likely that a weak print at next week’s CPI report for the second quarter of 2024 could unlock a rate cut on August 14.

The market has quickly adjusted to the new conditions by pricing at a 60% probability for a summer rate cut, which will increase further if CPI surprises on the downside, and there will be a total easing of 47bps by year-end.Economic Calendar

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.