19 Feb 2024 Forex Analysis

Currencies: A Weekly Market Analysis

  • Resilience Amid Inflation Concerns: Despite worries over US inflation, US stock indices and gold prices have managed to recover losses, maintaining positions close to multi-year highs. Persistent inflation at both producer and consumer levels in the US has surprisingly not impacted the robustness of stock indices.
  • US Inflation Data’s Influence: The recent US inflation reports have pushed Treasury yields and the US dollar higher, adjusting the market’s rate cut expectations. Although initially, US CPI and PPI figures led to a dip in US indices, a swift recovery was observed, stabilizing the markets by week’s end.
  • Volatility and Market Stabilization: The week saw a spike in market volatility following the US CPI announcement, as indicated by the VIX chart. However, stability was restored, with US indices closing near recent highs, showcasing market resilience.
  • Global Market Dynamics: The FTSE 100 notably excelled, buoyed by positive UK economic data and a slight uptick in the US dollar, benefiting from its multinational earnings base.

Stock Market Insights:

  • Goldman Sachs Elevates S&P 500 Forecast: Goldman Sachs has updated its S&P 500 target to 5,200, attributing the revision to expected profit expansion. This adjustment follows the stock market’s achievement of surpassing the 5,000 milestone, marking the second forecast update for 2024 by Goldman Sachs.
  • S&P 500’s Projected Growth: The revised target represents a 3.9% increase from current levels, with Goldman Sachs boosting its earnings-per-share forecast for the index, particularly anticipating growth in the tech and communication sectors.
  • Earnings Growth Drives Market Optimism: Despite the upward revision, the firm anticipates valuation multiples to remain steady, highlighting earnings growth as the main driver for future stock gains. The S&P 500’s performance has been notably influenced by Federal Reserve policy adjustments and AI-driven tech stock rallies.
  • Wall Street’s Adjusting Forecasts: With Goldman Sachs leading the charge, other Wall Street firms are considering revising their S&P 500 forecasts upwards, suggesting a potential underestimation in current median projections.

Cryptocurrency Movements:

  • Stable Bitcoin and Declining Ether: In the realm of cryptocurrencies, Bitcoin has shown stability at $52,368, while Ether experienced a 1.71% drop to $2,921, reflecting the ongoing volatility in digital asset markets.

Summary Points:

  • Market Demonstrates Resilience Against Inflation Fears: Despite initial setbacks from US inflation data, stock indices and gold prices have bounced back, underscoring market strength.
  • Goldman Sachs’ Optimistic S&P 500 Outlook: With a new target of 5,200, Goldman Sachs forecasts a bright future for the S&P 500, driven by profit growth in key sectors.
  • Earnings Growth to Fuel Further Advances: The stock market’s future gains are expected to hinge on earnings growth, with valuation multiples projected to remain unchanged.
  • Cryptocurrency Market Observes Mixed Performance: While Bitcoin remains steady, Ether sees a slight decrease, highlighting the cryptocurrency market’s inherent volatility.

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