An important day for the US Dollar and US stocks as investors anticipate the first Gross Domestic Product reading of 2023. The Advance GDP figure is the first reading of the 4th quarter and will give a clearer economic outlook. A positive figure can influence both the US Dollar as well as Stocks. Investors are also cheering on the performance of the technology market and specifically the NASDAQ.
The day’s main revelation came from Tesla’s earnings report which beat expectations regardless of lower China sales. Tesla’s stock price has spiked by almost 6% outside of trading hours.
US Dollar - Investors Await this Afternoon’s GDP Release
The US Dollar Index during this morning’s Asian session has remained stable at 101.63 and has kept to yesterday’s price range. Investors are awaiting today’s release to determine how the price is likely to alter. As we entered the European session, investors started moving toward the US Dollar. However, investors note that the price will largely be influenced by this afternoon’s releases.
Most major currency pairs including the EUR/USD and GBP/USD are trading at a well-known resistance level. The EUR/USD increased to 1.09294 which triggered a collapse on the 23rd of January. Traders are concerned this may result in low sentiment toward placing further buy orders on the Euro. Furthermore, the GBP/USD has formed a Head and Shoulder pattern known as a bearish signal. However, technical analysts have also noted that the latest bullish wave has resulted in a higher high on the RSI. This indicates possible strength in the price of the exchange.
EUR/USD 1-Hour Chart January 26th
The GDP figure will be crucial to the pricing considering technical analysis has both bullish and part bearish signals. Markets expect the Advance GDP figure to read between 2.6% and 2.7%, which is lower than the 3.2% in the third quarter. Even though the GDP figure is significantly lower in the fourth quarter, there is still some positive news for the US economy. The Personal Consumption levels are expected to rise from 2.3% to 2.8%. If the figure indeed increases it will be deemed positive for the economy and specifically for stocks.
Another positive trend for US equities and consumers is the Core PCE for the quarter. The Core PCE is specifically important for monetary policy and the Federal Reserve will monitor closely. The PCE index is expected to decline from 4.7% to 3.9% which supports the weakening of the monetary policy. However, this is unlikely to shift the Fed policy for February. It is expected that the FOMC will vote for a 25 basis point hike.
NASDAQ - Tesla Beats Earnings Expectations
The NASDAQ has been repeatedly mentioned as part of NAGA’s Market Analysis over the past week due to the increase in investor confidence and the recent earning reports. As mentioned yesterday, the price of the index came under pressure during the Asian session as investors refrained from the market before Tesla’s earnings release. However, the decline remained limited and the index increased by 1.58% after the opening of the New York Session.
The NASDAQ continues to be the best-performing index increasing by 4.14% over the past week, whereas the SNP500 shows a 2.67% climb and the Dow a 1.73% increase. The main development supporting the bullish trend is Tesla’s 4th quarter earning report released after the market’s close.
The Earnings Per Share read $1.19 which is 7.28% higher than the previously expected figure. Revenue came in as expected at $24.32 billion which is 11% higher than the third quarter. Tesla has now beaten their Earnings per Share expectations for the past 4 quarters. Even with the positive earnings, the share price over the past 6 months has struggled due to the restrictive monetary policy and poor publicity regarding the CEO’s decision to sell many shares.
Another concern for investors is the expectation of a weakening employment sector over the next 6 months. The technology sector has made headlines regarding its large-scale layoffs, but this has not yet shown in the US’s unemployment rate. Surveys, according to economists, are showing a weakening in the employment sector and economists are simply waiting for this to show jobless claims and the unemployment rate.
So far, the NFP figures have slowed, but no changes have been seen in the Unemployment rate. The Federal Reserve is unlikely to support the employment sector while inflation remains high. This is an issue for the equity market but has had a limited effect while no rise in the unemployment rate has been shown. Throughout the day investors will be concentrating on the Advance GDP release.
Gold Slips Ahead of GDP Release
The price of Gold declined by 0.18% during this morning’s Asian session as the GDP release edges closer. Take a look at our latest video on Gold’s price movement ahead of this afternoon’s release.
Summary:
- The US Dollar remains stable while investors await the first GDP reading for the fourth quarter.
- Markets expect the Advance GDP figure to read between 2.6% and 2.7%, which is lower than the 3.2% in the third quarter.
- The NASDAQ continues to be the best-performing index increasing by 4.14% over the past week.
- Tesla’s Earnings Per Share reads $1.19 which is 7.28% higher than the previously expected figure.
