The US Dollar remains under pressure in the short term but has been supported by some positive fundamentals. Yesterday afternoon the US released its latest Consumer Confidence Index and Job Openings and Labor Turnover Survey (JOLTS); both performed better than expected.
Economists have advised that the US economy is at a much lower risk of a recession than the UK and Europe. Both regions will likely experience a recession in the year's fourth quarter.
Even as the Fed increases interest rates, consumers may remain resilient for some time as the current balance sheet levels are higher than usual. This is because of fiscal stimulus during the pandemic and the strong performance of the investment market during 2021.
Therefore, simply raising interest rates to fight inflation may not be enough. Government spending will also need to be cut. Fiscal policy should also be stabilized. This may have contributed to the strong Confidence Index (CCI), which is the highest in 3 months, and the strong employment sectors.
EUR/USD - Technical View
The EUR/USD remains unstable and currently shows little certain price direction. However, overall the Euro has increased in value to form a retracement. The retracement so far remains weak and has not managed to increase to previous support and resistance levels. The prices remain far below average, including the 2-month Exponential Moving Average, 3 Month EMA, and 6-month EMA.
The latest economic releases influence the US Dollar. The Consumer Price Index (CPI) reached a 3-month high after increasing from 95.3 to 103.2. In addition, the US released the Job Openings and Labor Turnover Survey (JOLTS), which had almost 1 million more vacancies than had been predicted. The US Job Openings increased from 10.37 Million to 11.24 Million within a single month.
The Euro continues to be supported across the board due to the tightening of the Monetary Policy, which is predicted to increase by 0.50%. Meanwhile, inflation in Germany accelerated from 7.5% to 7.9% when looking at annual figures, while the monthly rate slowed down from 0.9% to 0.3%. The slowdown was partially due to cheaper gasoline, but it should be noted that food and energy prices continue to rise.
Meanwhile, the energy crisis in the Eurozone is getting worse, and there is a sense of panic as the winter months are edging closer. The current EU presidency of the Czech Republic has initiated an urgent meeting of energy ministers on Sept. 9 to discuss emergency steps. The goal is to reverse the situation with a sharp increase in fuel prices after sanctions on gas supplies from Russia.
The President of the European Commission, Ms. Von Der Leyen, announced that they are working on an emergency structural reform of the Eurozone electricity market to minimize dependence on imports. In particular, it is planned to allocate 300 Billion Euros for the transition to renewable energy sources. However, this will not likely assist in the short to medium term.
S&P 500 - Technical View
The S&P 500 declined again in the last trading session, bringing the index down to form its third bearish weekly candlestick. After reaching its latest highs, the index has declined by 7.50%, with yesterday’s decline measuring 1.21%. The decline in the US stock market has mainly been a result of a more hawkish central bank as well as the earning season coming to an end.
The price during this morning’s pre-market open session has actually increased by 0.49% but continues to remain lower than yesterday’s price open. The price may be partially supported by the Confidence Index released yesterday. However, the index is predicted to be pressured while the Fed continues to increase rates.
Home Depot Inc (NYSE:HD) is one of the latest companies to announce their dividend decision. The next quarterly dividend payment is scheduled for Sept. 15, when shareholders receive $1.9 per share.
The register will be closed at the end of today’s trading session. The dividend payment will give a yield of 2.56% per annum. Dividend yields have been considerably high after the latest earnings reports. However, this has not yet managed to support the price of the US Stock Indices.