Earnings Season Officially Kicks Off Throwing USD Off its Game

The US Dollar slightly declines within the Asian session as market’s show a “risk on” sentiment, especially amongst US equities. The issue with high inflation and the likelihood of further consecutive interest rate hikes is a highly influential factor. However, investors have turned their attention to the stock market as the earning season officially kicked off. Many investors have voiced their interest in the opportunity, considering the recent discounted price. FOMC members have expressed concern that investors are not taking the Fed seriously and haven’t priced in the monetary policy.

This morning, investors are waiting for the earnings reports of Johnson & Johnson and Netflix. Both companies are predicted to see a lower earnings figure compared to the previous year, but this cannot be confirmed until the release. J&J is predicted to see a decline from $2.60 to $2.49, while Netflix is expected to see a much sharper drop from $3.19 to $2.11. Having said that, investors are also aware that Netflix will soon have an extra line of income from ads.

The cryptocurrency market has also slightly increased over the past 48 hours. Nonetheless, investors will monitor the frailty within the cryptocurrency market during the earning season. The total crypto market capitalization has decreased from $954 million to $940 million over the past week, but Bitcoin’s share of the market increased to 40.30%.

Lastly, investors are also waiting for the federal Japanese government to officially intervene in the currency market again. The previous intervention took place at 145.000, which only provided temporary assistance. The price is now just below 149.000 and economists believe the government will be tempted to intervene at 150.000 again.

GBP/USD

The GBP/USD pair is currently trading around the daily open price but has been seeing some bearish price movement. The price is still within an Elliot Wave style bullish trend and currently trading within its third retracement. In the longer term, the price has more or less formed a full price correction after support from the government’s U-Turn on its fiscal policy.

GBP/USD 30-minute chart on October 18th

When looking at technical analysis, we can see the price is within a retracement. This means the price can develop either into a downward correction of the previous wave or move onto a higher high. When looking at the regression channel, the price has moved into the short zone and crossovers have pointed downward. Both indicate downward price action but traders should be cautious of a further swing, especially as the US Dollar is falling this morning. Overall, indicators signal a potential downward trend.

As mentioned above, the price of the Pound is clearly supported by the new Chancellor’s decision to switch from an expansionary fiscal policy to a contractionary policy. This has calmed markets and given assurance that the UK budget will remain positive, but at the same time, the move is likely to pressure the economy further into a recession.

The new Chancellor, Jeremy Hunt, has advised that the government will not reduce the tax rate for the country’s wealthiest citizens, nor will they scrap the previous plans to increase their corporation tax rate. However, investors are still waiting for confirmation on other parts of the policy such as the national insurance rate alterations.

Most economists believe that the UK economy will be the first country in the West to fall into a recession. According to economists, there is a clear difference in consumer confidence between the UK and the US. There is also predicted political instability for the next 6 months. The recently axed Chancellor has advised that the prime minister, Lizz Truss, will be forced to resign.

Investors will be focusing on how the Bank of England reacts to the government’s U-Turn. Will they stick to the hawkish policy stance?
In addition to this, the market is anticipating the UK’s latest CPI figure tomorrow, and their latest PMI next week.

Quick Summary:

• Investors await for the quarterly earnings report of both J&J and Netflix today.
• FOMC members warn that the market has not priced in further interest rate hikes.
• Currency investors expect further intervention from the Japanese government.
• UK investors are more confident after the new Chancellor confirms the country’s fiscal policy.
• The UK Government is predicted to be the first to fall into a recession in the West.