US Open Note – Stocks to close the week unharmed as the focus turns to the Fed



Stocks flirt with record highs

Despite a choppy week, which spurred pandemic fears before putting them back to rest again, global stocks bound up their wounds as investors cheered on robust corporate profits and assessed that fiscal and monetary policy could still protect economies from covid breakouts.

Industrials, basic materials, and consumer cyclicals drove gains in the pan-European STOXX 600 today, pushing the index closer to its recent record highs, while upbeat earnings in telecommunications and autos underpinned sectoral advances.

Wall Street staged a faster recovery than its European counterparts, with the Nasdaq 100 hitting fresh all-time highs on Thursday. The S&P 500 is also flirting with uncharted territory ahead of a promising week, which may see earnings releases from Apple, Facebook, Google’s parent Alphabet, and other tech companies likely beating analysts’ forecasts as Twitter’s results did yesterday.

Euro in cautious mode as Fed comes under the spotlight

The Fed’s policy announcement next Wednesday, however, could be a headwind to stocks if the central bank talks about tapering. Yet, given the surging infection cases in the US and the challenging conditions in the labor market, the Fed may use a neutral tone instead, with investors shifting attention to the Jackson Hole symposium in late August for any policy updates.

On the other hand, the ECB clarified yesterday that it won’t adjust its ultra-easy policy for the foreseeable future, although comments from ECB's Wunch revealed today that not all policymakers are on the same page. Nevertheless, the ECB’s dovish forward guidance suggests more weakness for the euro, and perhaps a stronger dollar assuming tightening actions from the Fed.

Following the ECB's dovish signals, even an unexpected rise in the EU flash Markit PMIs for July could not boost euro/dollar today, leaving the pair stable around 1.1770.

Other news

In the UK, the pound was pushing to recover earlier losses and hold above 1.3700 against the greenback despite disappointing Markit PMI figures.

In other data, Canadian retail sales declined less than expected in May, but the loonie barely reacted, with dollar/loonie remaining flat near weekly lows at 1.2567 and loonie/yen trading stable at 87.88.

Dollar/yen could attract some interest in the coming sessions as the pair is trying to breach resistance around the 20-day simple moving average at 110.40.

Turning to commodities, gold slipped to two-week low of $1,789 before bouncing back above the $1,800 mark. WTI oil futures keep pushing for a close above the $72.00/bpd level.

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.