A roller-coaster week for stocks ended with even more drama last Friday, as Google and Microsoft published stellar earnings reports that were good enough to lead a market-wide rally. Tech stocks in general performed well, as evidenced by the Nasdaq Composite gaining a full 2% on the day. The S&P 500 lagged behind but still climbed a respectable 1% by the closing bell; the Dow Jones Industrial Average closed 0.4% higher.
On the other side of financial news scale, PCE numbers dropped on Friday, to little surprise overall. The Fed’s preferred inflation metric revealed a year-on-year increase of 2.8% versus expectations of 2.6%, while the month-on-month figures fell exactly in line with consensus at 0.3%. While only a small deviation, market participants are understandably becoming more and more sceptical of just how much of an interest rate cut we will see this year. Speaking of which, the Fed is due to announce an interest rate decision on Wednesday; no change from the current rate thoroughly priced in.
The Dollar seemed to capitalise on the sentiment, climbing half a percent on Friday, the DXY doing just enough to reclaim 106 points. Gold appeared content to remain out of the spotlight throughout most of last week, moving very little after Monday’s initial drop.
Strength in the Dollar contributed to woes in the Japanese Yen, which saw its exchange rate collapse on Friday, blasting through 156 and then all the way up to 158. The wording from the Bank of Japan last week inspired confidence in no one. The country’s central bank lowered its forecasts for economic growth this year, while data revealed lower than expected inflation figures for Tokyo. Given the huge discrepancy in interest rates between the Yen and the Dollar, traders see little reason to favour the former over the latter.
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