The US stock market opened the last trading week of the month at fresh historic highs. Currently, US stocks are holding at one-year highs. Despite a dip in the early American session yesterday, the stocks quickly offset losses and closed at new highs. Experts point out at a notable difference between trends in developed and emerging markets. While US stock indices are printing new highs in confidence, indices of emerging markets are trading at the lowest levels of the year. Now let’s discuss it in detail!
The S&P500 is trading higher at near 4,422. The index is expected to trade in the corridor of 4,400 to 4,500. Why are analysts bullish about the index? Investors are pleased about financial statements of major American companies. By the end of the session today, 90% of companies included in the S&P 500 reported better-than expected corporate earnings for the second quarter. So, the bullish forecast rests on solid fundamentals.
The US dollar index, which measures the greenback’s strength against a basket of six rival currencies, has been trading in a narrow range of 92.40 to 93.00. The odds are that the index will remain trading sideways until the Fed’s policy announcements tomorrow evening. In case the regulator brings up any hints about a shift towards monetary tightening, the US dollar could receive a boost for a further advance. So, its index is likely to climb over 94.00 and even higher. Experts have weighty arguments in favor of their bullish outlook.
At the same time, the US dollar looks weaker than its Canadian peer unlike the other major currencies. The loonie gains strength from a recovery of oil prices and a rally in the US stock market. The USD/CAD pair is trading at about 1.2570. The expected corridor is between 1.2500 and 1.2620. Importantly, if the Federal Reserve updates its monetary policy tomorrow, this will reinforce the US dollar on the one hand and push oil prices down on the other hand. These two factors could drive the USD/CAD pair up towards 1.2800.
When it comes to the crypto market, the situation has changed for the better for investors. Bitcoin has been gaining ground for the second day in a row. Notably, the number one cryptocurrency has won back yesterday’s losses almost in full. This market move came as a pleasant surprise. Another catalyst for Bitcoin’s growth today is the news that 10,300 digital tokens worth 384 million dollars were bought at the FTX crypto derivatives exchange. To extend the uptrend, Bitcoin has to stay firmly above the level of 40,000 dollars. Otherwise, an imminent retracement below 35,000 – 37,000 dollars will follow.
To sum up, the US Fed is opening a two-day policy meeting tonight. The policymakers have to adjust their decisions for soaring inflation in the US which has been holding above 5% for a few months. The rate-setting committee is due to present their statements on Wednesday night. The burning question for markets is whether the US central bank intends to scale back its massive stimulus programs. So, the market sentiment will depend on the Fed’s policy update tomorrow.
