Stocks Slip As Fed Members Voice Support For 75bps Hike

Stocks have rolled over while the US dollar retained its strength into the end of the week. US data yesterday helped to keep the greenback supported with the Philly Fed manufacturing index coming in above forecasts and weekly unemployment claims. Fed commentary yesterday further diluted the view of a near-term “Fed-pivot”, with FOMC members including Fed’s George putting focus on the chances of a larger 75bps hike next month.

USD traders now await further key data releases next week to act as the next directional catalyst. Little in the way of key US data today means flows are likely to be subdued ahead of the weekend as traders eye upcoming GDP data next week.

Key Factors for Today

- USD ending the week at fresh highs following positive data and supportive FOMC minutes
- Fed members yesterday voiced support for continued tightening including the likely need for a further 75bps hike in September
- Stock markets tumbled + weak Target earnings
- USD remained strongest in FX with GBP the weakest performer, once again
- Light data sheet today should see USD remain firm into weekend

Coming Up

- EUR Eurozone current account
- CAD Canadian retail sales
- USD US mortgage delinquencies

Equities Indices Fall on Firmer US Dollar

Global asset markets stayed pressured into the end of the week as the rally in the US Dollar kept investor sentiment weakened. Broader recessionary risks remain a key backdrop here though, near-term, the Fed’s commitment to battling inflation is leaning on equities indices.

Action was mixed across the European open on Friday, however, with the ASX and the Nikkei both continuing to press higher. US, UK and European markets bore the brunt of the selling, however, with the Dax remaining under pressure following a more than 2% drop yesterday.

Soft Earnings From Target

A weaker set of earnings from US retailer Target added to bearish sentiment yesterday. The company noted a 90% drop in profits, year on year, citing the negative impact of inflation on consumer habits. Following better earnings from Walmart and Home Depot earlier in the week, the results were a blow for US equities bulls and reflected the uncertainty within the economy heading into the remainder of the year.

USD Ends A Strong Week in FX, GBP Remains Pressured

In FX, once again the US Dollar is the strongest performer over the European open. A week of better data and supportive Fed commentary has seen the greenback posting its best week since early July. The British Pound remained the weakest currency as we head out the week.

Growth concerns in the UK have returned to central focus on the back of record inflation figures for July. Traders’ growth projections throughout the remainder of the year are seemingly trumping any focus on near-term action from the BOE. However, decisive action and guidance from the BOE next month might well fuel a shift in this narrative.