It’s set to be another major week in the markets, with the Federal Reserve meeting to decide on the future of US monetary policy, while Big Tech companies such as Apple, Microsoft, Alphabet, Facebook and Amazon are set to report their latest quarterly financial performances:

Monday, July 26

  • Japan Jibun Bank PMIs
  • Germany IFO business climate and expectations
  • Tesla earnings

Tuesday, July 27

  • IMF World Economic Outlook update
  • China industrial profits
  • US consumer confidence
  • Microsoft, Apple, Alphabet earnings

Wednesday, July 28

Thursday, July 29

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  • Eurozone economic/consumer confidence
  • Germany unemployment, CPI
  • US Q2 GDP (advanced), initial jobless claims
  • Amazon earnings

Friday, July 30

  • Japan industrial production, retail sales, unemployment
  • Eurozone unemployment, CPI, GDP
  • US personal income/spending, consumer sentiment, core PCE inflation

 

Fed to hearten dollar bulls?

Last week, the equally-weighted US dollar index set a new year-to-date high, only for such lofty levels to come undone as the week went on. Still, having pulled away from its upper Bollinger band, this index appears to have cleared some froth and in so doing, has paved the way for more potential upside.

Of course, dollar traders will be closely monitoring what the Fed has to say this week about the central bank’s plans for tapering.

Recall at their last policy meeting in June, the FOMC surprised markets with a hawkish tilt in the famous Fed dot plot, penciling in two US interest rate hikes for 2023. That sent the buck surging! However, since then, Fed Chair Jerome Powell has reiterated a dovish messaging, saying that policymakers are in no rush to ease up on their asset purchases that have supported financial markets since the pandemic.

Although there won’t be another Fed dot plot issued this week, market participants will be closely monitoring the Fed’s policy statement and Fed Chair Jerome Powell’s post-meeting press conference to get more clarity on the central bank’s next moves, especially in light of the stunning US economic recovery.

Over the coming days, should either the Q2 GDP, consumer confidence, initial jobless claims, personal income/spending, or even the Fed’s preferred inflation gauge show that the world’s largest economy is taking bigger strides into the post-pandemic era, that could hasten the Fed’s paring of its bond purchases, despite what dovish officials have been saying publicly. And global investors are set to use the hard US economic data to test the Fed’s resolve in sticking to its ultra-accommodative stance, and manifest their outlook for US monetary policy via the greenback.

More substantive signals that the Fed is getting closer to tapering could send the US dollar index sustainably above the 1.10 line.

Nasdaq 100 poised for fresh peaks

The futures contracts for the Nasdaq 100 are holding above the 15,000 mark at the time of writing, after having registered a close above that psychologically-important level for the first time in history this past Friday. Such has been the resilience of tech stocks that they’ve been able to overcome the mid-month wobbles to post a new record high!

Tech stocks have been fuelled by better-than-expected earnings, especially given Twitter and Snap’s stellar Q2 results announced late last week. Note that the heavy hitters that are scheduled to reveal their respective Q2 results in the coming days have a combined market capitalisation of almost US$ 10 trillion:

(as of US market close on Friday, 23 July)

These 6 companies account for about a quarter of the S&P 500’s total market cap of US$ 39 trillion and more than half of the Nasdaq 100’s US$ 17.1 trillion. In other words, how these stocks move collectively could have an outsized impact on the broader index.

At the time of writing, the Nasdaq 100 minis are flirting with overbought territory. However, with momentum still pointing northwards, one would think that fresh record highs are there for the taking over the near-term for this tech-heavy index, especially if we see some positive surprises in the Big Tech earnings due this week.

 

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