FED MEETING MINUTES HAVE NOT YET SUPPORTED THE DOLLAR - 1.2.2018

According to the ADP report, the number of jobs in the US increased more than expected in January 2018. The official US labor market data will come out on Friday and, are most likely to be positive. Boeing published a positive earnings report for the Q4 of the last year and a positive forecast for 2018. Its stocks have risen by almost 5% and contributed to the growth of the entire aerospace sector. Investment banks and brokerage companies raised the net profit forecast of the list of the companies in S&P 500 to 13.7% for the Q4. Before the start of the reporting season, the growth forecast was only 12%. About 190 companies in S&P 500 have already reported. The profit of 80% of them exceeded forecasts. Yesterday the Fed meeting took place. As expected, rates remained at the same level of 1.25-1.5%. According to the meeting minutes, there is a rate hike possibility in 2018. However, market participants do not expect the new Fed President Jerome Powell to rush in the tightening of the monetary policy. The US dollar index remained almost unchanged and is still close to its 3-year low. Investors expect a future increase in rates and the tightening of the monetary policy in the eurozone, Japan, Britain and other countries. On this background, the Fed actions should be more decisive, so that the dollar starts to noticeably strengthen. However, its dynamics may be affected by economic data. In particular, today the ISM Manufacturing PMI for January, as well as construction expenditure for December will be published in the US.

According to preliminary estimates, inflation was 1.3% in January, which is much lower than the target level of 2%. The weak growth of consumer prices may contribute to preserving the monetary stimulus policy for the European economy. This is a positive factor, but the stock market dynamics was influenced by the weak earnings reports by the debt collection company Intrum Justitia (stocks fell by 8.9%), clothing chains’ stores H&M (-10.6%) and outsourcing company Capita (-47%). This morning, European stock indices were growing alongside with the US futures. Facebook raised its profit forecast. In addition, today the positive earnings reports of Nokia, Roche, Unilever and Dassault Systѐmes were published. Today no significant economic data in the eurozone are expected. Today the euro has been growing slightly amid the dollar weakening. However, it is below the psychological level of 1.25. In January, the euro rose by 3.5% and updated its 3-year high.