Forex Daily Market Analysis: 29 Jan 2024

CURRENCIES:

Overview:

The final week of January is known for its high activity, and this year is no exception.
The economic calendar is packed with crucial events, including decisions from the Federal Reserve and Bank of England, US nonfarm payrolls, German and Euro Area Q4 growth data, Chinese manufacturing and services PMIs, and German and Euro Area inflation data.

Tech Company Earnings:

Alongside economic events, significant US tech companies will release their Q4 results.
On Tuesday, Alphabet (GOOG) and Microsoft (MSFT) present their financial reports, followed by Amazon (AMZN), Apple (APPL), and Meta Platform (META) on Thursday.
To stay updated on earnings releases, check the DailyFX Earnings Calendar.

Market Trends:

Despite record-breaking performances in US equity markets, the upcoming earnings reports from the Big 7 tech companies may impact indices due to their substantial weight.
Last week, Tesla (TSLA) faced a market slump of around 12% post-earnings release.
Investors continue to adopt a risk-on approach.

Euro and US Dollar Dynamics:

Despite the ECB maintaining unchanged monetary policy settings, the Euro faced pressure as markets anticipate potential interest rate cuts in Germany and the Euro Area due to sluggish economic growth.
The Euro Area and German GDP data scheduled for the upcoming week will be closely observed.
The US dollar remained in focus, with a stable performance despite slightly better-than-expected US Core PCE report and a robust advanced Q4 GDP release last week.

STOCK MARKET:

Economic data: Dallas Fed manufacturing activity, January (-9.3 prior)
Earnings: Cleveland Cliffs (CLF) Phillips (PHG), SoFi Technologies (SOFI), Whirlpool (WHR)
Earnings Highlights:
Earnings reports from major tech giants, including Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META).
106 S&P 500 companies, including six Dow components, set to report this week.
Federal Reserve Meeting (Wednesday):
Expected announcement of latest policy decision.
Anticipation of interest rates remaining unchanged (5.25% to 5.50%).
Investors closely watching for insights during Fed Chair Jerome Powell’s conference, particularly regarding potential future rate cuts.
January Jobs Report (Friday):
Economists expect a modest decrease in job additions.
Unemployment rate projected to stay flat at 3.7%.
Additional Highlights:
Updates on activity in the manufacturing and services sectors.
Latest data on job openings.
Key earnings reports from AMD, Starbucks, Pfizer, Chevron, Exxon Mobil, and Boeing.
Market Trends:
Stocks ending the week near record highs.
The S&P 500 and Nasdaq Composite up over 2% in January.
Dow Jones Industrial Average up more than 1%.
Federal Reserve Outlook:
Shift in market narrative since December; investors initially priced in a March cut.
Inflation at its lowest in nearly three years.
Expectations for a potential future rate cut.
Market pricing in a 47% chance of a March cut and an 88% chance of lower rates by May.
Earnings Impact on Market Narrative:
Excluding Tesla, the top six earnings drivers for the S&P 500 are expected to be the “Magnificent Seven” tech stocks.
Anticipation that these tech giants will contribute to a 53.7% year-over-year earnings growth, while the remaining 494 companies may report a 10.5% earnings decline.
Critical market direction anticipated based on stock price reactions to tech companies’ reports.