Asian stocks rallied on Tuesday, following a surge on Wall Street that sent the S&P 500 to a near all-time high and the Cboe’s Volatility Index to its lowest level since late January. The strong earnings season has been the key factor lifting U.S. stocks. With 24.1% earnings growth and more than 79% of S&P 500 companies managing to beat profit forecasts it looks to be the best earning season in recent history.
After a five-day losing streak, the euro/U.S. dollar (EUR/USD) currency pair has finally – at least for the time being – put an end to its recent downward trend and was climbing back towards the 1.16 handle. Other major euro crosses were also trading higher, suggesting it was not just the dollar weakness that had helped to underpin the EUR/USD.
The dollar has remained bid against most currencies post-Friday’s U.S. jobs report. The greenback rose on Friday in reaction to the mixed-bag nonfarm payrolls report which showed a weaker-than-expected headline number, but that was offset by positive revisions to the previous reports and a decent but expected rise in average hourly earnings figure.
The U.S. dollar fell on Friday after the U.S. Non-farm payrolls (NFP) came in below expectations with only a gain of 157,000, but otherwise the unemployment rate dropped to 3.9% and wage growth remained unchanged at 0.3%.
Before this eventful week is over, there’s just the small matter of the U.S. monthly employment report to consider. Ahead of the release of the nonfarm payrolls data, the US dollar has regained its poise slightly, although it still remains stuck inside the one-month-old range. Could the NFP cause it to finally break out in one or the other direction? The U.S. Department of Labor will report on Friday at 13:30 BST or 08:30 EDT the number of jobs added to the U.S. economy in July, the unemployment rate, and key wage growth figures.
As anyone who was paying a modicum of attention could easily tell you, the Federal Reserve was never going to make any changes to monetary policy at today’s meeting. Instead, traders were tuning in to see any changes to the central bank’s statement and extrapolate what that may mean for interest rates moving forward.
The dollar’s choppiness has been a dominant theme for several weeks now, but as we come to the business end of this week, it could finally make a more decisive move in one or the other direction. The indecisiveness is a reflection of a tired bullish trend: market participants have been piling in on the greenback for several months amid an improving macro picture in the United States and speculation over further rate hikes from the Federal Reserve.
It’s become gospel that technology is the most important sector of the U.S. stock market; after all, tech stocks have the largest weighting in the S&P 500 (~26%), and the sector outperformed all others over the last year (+26%).
Contradicting reports surrounding the state of the U.S.-China trade relations are likely to create a sense of confusion across all markets, while also possibly desensitizing investors towards global trade developments.