- UK Retail Sales witnesses its strongest increase since May 2021, but economists advise the increase is simply correcting poor data from previous months.
- The Pound gains against most currencies, but the currency market has their eyes fixed on the upcoming US Producer Price Index.
- Applied Materials soars above earnings expectations. Earnings Per Share beat expectations by almost 12% and revenue by 3%. The stock rose 12% after market close.
- Bitcoin again renews its recent highs rising another 2.15% on Thursday. Cryptocurrencies are also likely to witness strong influence this afternoon.
GBPUSD – UK Retail Sales Beat Expectations
The GBPUSD was trading lower throughout the trading session but quickly rose to the day’s open price after the UK’s Retail Sales Release. The Retail Sales read 3.4%, significantly higher than 1.5% which was expected and -3.2% from the previous month. However, economists are advising a strong increase is not as positive as it may seem considering previous months saw a decline of 3.9%. Nonetheless, investors are reacting positively, and the GBP is rising moderately against all currencies.
In terms of technical analysis, the exchange rate is seeing neither bullish nor bearish signals. The price is trading at most trend lines and is neutral on most oscillators. In order for traders to obtain a clear signal, the exchange rate must maintain momentum and show a clear direction. If the price breaks above 1.26056, which is also the resistance level of the day before, buy signals will materialize. If the afternoon’s Producer Price Release is lower than expectations, a bullish breakout is likely to take place.
The US will release the Producer Price Index, Core PPI and the Prelim Consumer Sentiment. The strongest price driver will be the PPI and Core PPI release. Analysts expect both to read 0.1%, which is only slightly higher than the previous month. However, the question is if the rate of increase will be higher than expectations. Another higher inflation reading will again support the Dollar, but pressure Gold and US Stocks.
USA100 – Investors Await PPI Release and Attempt a Full Correction!
The USA100 saw a slight decline as we were approaching the US open due to weak Retail Sales, but again investors only used this to enter at a better entry level. The index ended the day 0.22% higher and is 0.85% lower than the previous high. Technical analysis currently points towards a full correction back up to $18,058, but this will largely depend on the Producer Price Index.
If the PPI reading is higher than 0.1%, the USA100 and the stocks market in general can witness another decline. The decline may simply be a retracement or a full correction back to 1.25341, but this would depend on how much higher the reading is. If the PPI and Core PPI reads 0.1% or lower, the bullish trend potentially can continue as per indications from Crossovers, VWAP, and Oscillators.
The index was supported by Applied Materials which released their quarterly earnings report. The company’s Earnings Per Share beat expectations by almost 12% and revenue by 3%. The stock rose more than 12% after the market close and can support the index if it continues to perform well in the upcoming days. The next major earnings report will be NVIDIA next Wednesday after market close.
Bitcoin – Net Inflows of Over $1 Billion this Past Week
The cryptocurrency market capitalization rose this week, but slightly fell this morning ahead of the PPI release. However, the general rise is positive for Bitcoin as is its higher market share which rose 0.29%. Investors should note the day’s inflation reading is likely to also affect Bitcoin in a similar way to the stock market.
The cryptocurrency market is being supported by the weaker monetary policy in China, one of its largest markets. However, the price action will depend on continued relaxation from across the globe. Another reason is demand for spot-Bitcoin ETFs which remains strong, with net inflows of over $1 billion over the past week. Technical analysts also note the importance of surpassing the $50,000 mark which is a strong psychological price/level.
Michalis Efthymiou
Market Analyst
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Investing in the stock market can seem like a daunting task, especially for those who are new to the game. But with the right information and strategy, it can be a lucrative endeavor. And as the saying goes, “knowledge is power.” This holds true for investors who are getting ahead of the game by snatching up stocks before the US Producer Inflation Report is released. In this comprehensive guide, we’ll dive into what this report is, why investors should pay attention to it, and some practical tips for capitalizing on this information.
Understanding the US Producer Inflation Report
Before we dive into why investors snatch up stocks before this report, let’s first understand what it is. The US Producer Inflation Report is released monthly by the Bureau of Labor Statistics (BLS). It measures the change in prices for goods and services sold by US manufacturers and producers. This data is then used as an indicator of inflation, a crucial economic factor that affects the value of stocks.
Why Investors Should Care
For many investors, inflation can be a worrisome factor as it can decrease the purchasing power of their assets. This is especially true for long-term investments. However, by keeping a close eye on the US Producer Inflation Report, investors can stay ahead of the game and make informed decisions about their portfolios.
Another reason investors should keep an eye on this report is that it can give insight into the overall state of the economy. Rising inflation can signal economic growth, while falling inflation can indicate a slowdown. This information can inform investors’ decisions on which industries or companies to invest in.
Valuable Tips for Investors
Now that we understand the importance of the US Producer Inflation Report, let’s look at some practical tips for investors to get ahead of the game.
1. Pay Attention to Key Indicators
The inflation report is not the only indicator that investors should pay attention to. Other reports such as the Consumer Price Index (CPI) and Producer Price Index (PPI) can also provide valuable information about inflation. By analyzing these reports together, investors can get a more comprehensive understanding of the inflation rate and make more informed decisions about their portfolios.
2. Diversify Your Portfolio
One rule of thumb for successful investing is to diversify your portfolio. This means spreading out investments across different industries, companies, and asset types. By diversifying, investors can minimize their risk and better weather any potential market fluctuations caused by the US Producer Inflation Report.
3. Consider Inflation-Resistant Assets
Inflation can have a significant impact on traditional assets such as stocks and bonds. Therefore, investors should also consider investing in assets that are less affected by inflation, such as real estate, commodities, and precious metals. These assets can act as a hedge against inflation and help maintain the value of the portfolio.
4. Keep An Eye on Interest Rates
Inflation and interest rates are closely tied. When inflation rises, the Federal Reserve may increase interest rates to control it. This can have a significant impact on the value of stocks, especially for companies that rely heavily on borrowing money. Therefore, investors should pay attention to changes in interest rates and consider the potential effects on their investments.
Real-Life Example: The Impact of Inflation on Stocks
Let’s take a look at a real-life example of how inflation can affect stock prices. In 2020, as the COVID-19 pandemic hit, many industries and companies suffered, leading to a decline in the stock market. However, the tech industry, particularly companies offering remote work solutions such as Zoom and Microsoft, experienced a surge in demand and subsequently increased stock prices. This is partly due to the fact that these companies were offering services that were in line with the changing work landscape caused by the pandemic.
One year later, as the US Producer Inflation Report showed a spike in inflation, the stock market experienced a pullback, and tech stocks took a hit. This is because rising inflation can lead to an increase in interest rates, making borrowing money more expensive for companies. The decrease in stock prices for these tech companies highlights the impact of inflation on the stock market, and how investors who were paying attention to the US Producer Inflation Report could have been better prepared for this market shift.
In summary, investors who snatch up stocks before the US Producer Inflation Report is released are taking a proactive approach to their investments. By understanding the report and its implications on the economy, investors can make more informed and strategic decisions about their portfolios. And with the tips outlined above, investors can position themselves to stay ahead of the game and capitalize on potential market shifts caused by inflation. So keep a close eye on the US Producer Inflation Report, and get ahead of the game in your investing journey.
