✅ Daily Market Analysis - 01 MAY 2024

١ مايو

Economic events:

USA - ADP Nonfarm Employment Change (Apr)
USA - S&P Global US Manufacturing PMI (Apr)
USA - ISM Manufacturing PMI (Apr)
USA - ISM Manufacturing Prices (Apr)
USA - JOLTs Job Openings (Mar)
USA - Crude Oil Inventories
USA - FOMC Statement
USA - Fed Interest Rate Decision
USA - FOMC Press Conference

On Tuesday, the S&P 500 underwent a decline, terminating its five-month streak of consecutive gains. This downturn was propelled by apprehensions surrounding inflation, ignited by data highlighting wage pressure. Concurrently, this development aligns with the commencement of the Federal Reserve's two-day meeting.

The Dow Jones Industrial Average witnessed a decline of 570 points, equating to a 1.1% decrease, while the S&P 500 experienced a 1.5% drop, and the NASDAQ Composite saw a 2% downturn. Particularly noteworthy is the S&P 500's recording of a 3% loss for the month.







NDX, SPX, and DJI indices daily chart

The escalation in US labor costs throughout the first quarter exceeded expectations, primarily propelled by rising wages and benefits. This development has revived apprehensions regarding inflation, particularly amid a diminishing investor confidence in potential Federal Reserve rate reductions.

As per the Employment Cost Index, labor expenses surged by 1.2% in the preceding quarter, following an unrevised 0.9% uptick in the quarter prior. On a year-over-year basis, labor costs climbed by 4.2%.

This report emerges following recent data indicating a buildup of price pressures in the initial quarter, amplifying concerns surrounding inflation.

The downtrend of EUR/USD persists for the second consecutive day, with the pair hovering around the 1.0650 level during Asian trading hours on Wednesday. Amid European market closures in observance of Labour Day, market participants eagerly anticipate the Federal Reserve's forthcoming policy decision.


EUR/USD daily chart

Despite the release of robust Eurozone data on Tuesday, the Euro encountered challenges in sustaining its upward trajectory. Notably, Eurozone GDP surpassed expectations, expanding by 0.3% in the first quarter. Moreover, the Harmonized Index of Consumer Prices (HICP) exhibited stable year-over-year growth, meeting anticipated levels. However, the core HICP, excluding food and energy prices, exhibited a softening trend, albeit still surpassing estimates.

Investor sentiment remains optimistic regarding the possibility of interest rate cuts by the European Central Bank in June, as a majority of ECB policymakers have signaled their endorsement for such measures.

On Tuesday, the Japanese Yen incurred notable losses against its American counterpart, reversing a significant portion of the gains witnessed the previous day, driven by the potential intervention by Japanese authorities. The primary contributor to the JPY's weakness is the substantial interest rate differential between Japan and the United States, a trend expected to persist in the foreseeable future. This, combined with heightened demand for the US Dollar, propelled the USD/JPY pair higher during intraday trading.


USD/JPY daily chart

Following the publication of the AiG Industry Index on Wednesday, indicating a continued contraction in Australia's private business activity for March, the Australian Dollar remains subdued. Despite this, market sentiment suggests that the Reserve Bank of Australia will maintain its current interest rates of 4.35% in the upcoming meeting scheduled for next week.

The Australian Dollar faced additional downward pressure following the release of disappointing Aussie Retail Sales data on Tuesday, raising speculation about its potential impact on the RBA's interest rate stance. However, optimism stemming from higher-than-anticipated domestic inflation figures from the previous week has led to speculation that the central bank might delay any decisions regarding interest rate cuts.


AUD/USD daily chart

During the early Asian session on Wednesday, the NZD/USD pair faces selling pressure around the 0.5880 level. The New Zealand Dollar depreciates in response to worse-than-expected employment data from New Zealand.


NZD/USD daily chart

In the first quarter of this year, New Zealand faced a notable increase in its unemployment rate amidst a prolonged recession compounded by high-interest rate conditions. According to Statistics New Zealand's report on Wednesday, the nation's Unemployment Rate rose to 4.3% in Q1 from 4.0% in Q4, surpassing market expectations of 4.2%. Simultaneously, Employment Change figures recorded a decrease of 0.2% in Q1, contrasting with the previous reading's 0.4% rise and falling short of the projected 0.3% increase.

The upsurge in the unemployment rate may prompt the Reserve Bank of New Zealand to uphold its elevated rate for an extended duration to counter inflationary pressures. Market sentiment suggests that the RBNZ is inclined to maintain a restrictive Official Cash Rate, with any potential for rate cuts unlikely until 2025.

As the Federal Reserve initiates its two-day policy-setting meeting, market consensus leans towards the central bank maintaining its benchmark interest rate within the current range of 5.25%-5.50%, a level sustained since July.

Investors are particularly attentive to Federal Reserve Chair Jerome Powell's subsequent remarks following the monetary policy statement. These remarks are expected to carry substantial significance, with investors keen to glean insights into Powell's alignment with the market's less dovish perspective on the rate outlook.