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Wednesday, September 21, 2022
Russia triggered a plan to formally annex the regions occupied in Ukraine. The continued tensions sent the safe-haven US dollar index higher this morning.
Australia’s Westpac-Melbourne Institute Leading Economic Index fell 0.1% year-over-year in August, following a 0.2% decline in the prior month. This being the fifth straight month of a decline in the index exerted pressure on the AUD/USD forex pair.
US crude oil stockpiled grew by 1.035 million barrels in the week ended September 16, below the consensus estimate of 2.321 million barrels, which sent WTI crude oil futures lower.
Argentina’s GDP grew by 6.9% in the second quarter, following a 6% growth in the prior quarter. Despite the figure topping market expectations of 6.5%, the ARS/USD pair remained flat in forex trading this morning.
Canada’s annual inflation rate declined to 7% in August, from 7.6% in the previous month. However, the CAD/USD forex pair remained under pressure due to a decline in oil prices.
What’s happening: Shares of Ford Motor Company fell on Tuesday, after the company issued an inflation-related warning.
What happened: The Dearborn, Michigan-based company said it was facing a significant parts shortage.
Ford warned that its cost of manufacturing may be substantially higher than prior expectations in the current quarter.
Why it matters: Earlier this year, Ford temporarily suspended production at some facilities due to supply chain issues. In July, the company had projected commodity costs to increase by $4 billion for the year.
The automaker said on Tuesday that costs had soared owing to high inflation and could be $1 billion higher than earlier projected for the current quarter.
“Higher inflation-related supplier costs seem to have a higher chance of recurring in comparison to chip shortages, suggesting some impact to 2023,” JPMorgan Chase analyst Ryan Brinkman said in a note to clients.
The latest warning from Ford came less than one week after FedEx withdrew its forecasts, citing a slowdown in global demand. Investors also remained on the sidelines ahead of the Federal Reserve’s policy decision scheduled to be announced later today. There are side speculations of the US central bank raising rates by more than 75 bps.
The warning issued by Ford also exerted pressure on the shares of General Motors, sending the stock lower by around 6% on Tuesday.
Ford said it could exit the current quarter with an inventory of 40,000 to 45,000 vehicles lacking parts. The company added that the cars awaiting parts are those that have disproportionately high demand and include its high-margin truck models and SUVs. A delay in the delivery of these models is expected to shift some net income and sales in the fourth quarter.
The company reaffirmed its adjusted EBIT (earnings before interest and taxes) outlook of $11.5-$12.5 billion for 2022. Management guided to adjusted EBIT for the current quarter at
$1.4-$1.7 billion, significantly below the $3.7 billion reported in the previous quarter and $3 billion in the year-ago quarter.
How shares responded: Ford’s shares tumbled 12.3% to close at $13.09 on Tuesday. The stock has lost around 21% over the past six months.
What to watch: Investors will keep an eye on Ford’s third-quarter results, which the company is scheduled to announce on October 26. Markets will also monitor the supply of parts to the company.
Context: The greenback climbed to trade near two-decade highs on Tuesday.
Details: The US Fed started a two-day policy meeting on Tuesday. Markets widely expect policymakers to announce a big rate hike, of 75bps or higher, to tackle rising inflation.
The US two-year Treasury yield climbed as high as 3.992%, reaching its highest level since November 2007, which provided further support to the greenback on Tuesday.
The US dollar index, which measures the currency’s performance versus a basket of major rivals, rose by around 0.5% to 110.22, inching closer to its strongest level in 20 years.
Market sentiment for the US dollar was also supported by economic data. Housing starts in the US surprisingly climbed 12.2% from a month ago to an annualised rate of 1.575 million units in August.
Traders also assessed the surprise rate hike by Sweden’s central bank, which boosted rates by a whole percentage point. The recent increase by the Riksbank was higher than expected, which sent the EUR/USD briefly higher.
The EUR/USD forex pair declined 0.55% to settle at 0.9970 on Tuesday, after dipping as low as 0.9864 earlier in the month for the first time in two decades. The GBP/USD declined around 0.5% to 1.1381, with markets awaiting a rate decision from the Bank of England on Thursday.
The Bank of Japan is also scheduled to meet this week. The USD/JPY forex pair gained around 0.4% to 143.72 on Tuesday, after surging as high as 144.99 earlier in September for the first time in 24 years.
What to watch: Traders await the interest rate decision from the Federal Reserve today. The Fed will likely announce a hike of at least 75 bps, which would be the third three-quarter point hike in a row. Investors will also monitor new estimates on inflation, economic growth and unemployment.
The release of existing home sales data will also remain in focus today. Existing home sales in the US had declined by 5.9% to an annual rate of 4.81 million in July and are expected to decrease again by 2.3% in August.
Other Markets: European trading indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.61%, 1.03%, 1.35% and 1.09%, respectively.
| Technical Levels | News Sentiment |
| EUR/USD – 0.9957 and 0.9965 | Negative |
| USD/CHF – 0.9641 and 0.9653 | Positive |
| Nasdaq 100 – 11827.71 and 11885.69 | Negative |
| Nikkei 225 – 27303.50 and 27337.00 | Negative |
| Platinum – 927.60 and 930.50 | Positive |
| Futures at 0400 (GMT) | ||
| EUR/USD (0.9965, -0.05%) | Dow ($30,835, 0.11%) | Brent ($90.81, 0.2%) |
| GBP/USD (1.1375, -0.05%) | S&P500 ($3,878, 0.13%) | WTI ($84.08, 0.2%) |
| USD/JPY (143.82, 0.07%) | Nasdaq ($11,934, 0.10%) | Gold ($1,671, 0.1%) |
Saudi Arabia’s balance of trade, Sweden’s unemployment rate, the UK’s public sector net borrowing, ECB’s non-monetary policy meeting, Indonesia’s loan growth, Italy’s construction output, Poland’s retail sales, South Africa’s inflation rate, Israel’s industrial production, UK’s CBI industrial trends orders, Mexico’s consumer spending, GDP aggregate demand and retail sales, US MBA mortgage applications, gasoline stocks, crude oil inventories, and distillate stockpiles, India’s money supply M3, Colombia’s business confidence, Russia’s consumer confidence and producer price inflation, as well as Argentina’s balance of trade and unemployment rate.
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