Stocks are on the rise in the wake of positive jobs, growth, and manufacturing data. However, that ability to treat good news as a positive for equities will be reliant on continued inflation declines, says Joshua Mahony, senior market analyst at online trading platform IG. Equities on the rise as US data dump boosts soft landing hopes “Tech stocks are leading the push higher for US equities today, as a raft of better-than-expected data brings greater confidence that we could be in for a soft landing. Despite expectations that we will see substantial demand destruction as recessionary pressures grow, today’s data deluge brought some optimism that US equities could face a less difficult period after-all. A sharp rise in durable goods orders, better-than-expected GDP, and falling initial jobless claims brought calm within markets that have seen jitters in the face of earnings concerns. However, the fact is that Q4 earnings season has been characterised by better-than-expected earnings (69% beat estimates) and revenues (67% beat estimates). To a large extent this reflects the fact that economists have come into this earnings season with a pessimism that provides a relatively low bar for companies to overcome. ” Good news is good news, for now “Today’s positive reaction to improved economic data reflects a willingness to take things on face value, rather than focusing on the implications for monetary policy. Despite the Fed dot plot signalling that interest rates will start to move lower in 2024, markets are pricing in a reversal as soon as Q4 2023. However, that optimism could shift if inflation remains stubbornly high and a relatively resilient economy provides the basis for a prolonged period of elevated rates from the Fed. With that in mind, today’s willingness to treat good news as good for stocks is reliant on inflation continuing to trend lower. With this week’s jump in Australian CPI fresh in our mind, all eyes now turn to tomorrows US core PCE inflation readout. ”

EUR/USD is seen consolidating its recent gains to the highest level since April 2022. Bets or smaller rate hikes by the Fed continue to weigh on the USD and lend support. The recent hawkish commentary by ECB officials further acts as a tailwind for the pair. Traders now seem reluctant ahead of the US macro data and key central bank meetings. The EUR/USD pair oscillates in a narrow band above the 1.0900 mark during the Asian session on Thursday and consolidates its recent gains to the highest level since April touched earlier this week. Traders seem to have moved to the sidelines and prefer to wait for important US macro data, which will influence the Fed's rate-hike path and provide a fresh directional impetus. The Advance US Q4 GDP print is due for release later during the early North American session. This will be followed by the Core PCE Price Index - the Fed's preferred inflation gauge - on Friday. In the meantime, the prospects for a less aggressive policy tightening by the US central bank keep the USD bulls on the defensive near an eight-month low and acts as a tailwind for the major. Investors seem convinced that the Fed will soften its hawkish stance amid signs of easing inflationary pressures in the US. In fact, the CME's FedWatch Tool points to over a 90% probability for a smaller 0.25 bps rate hike at the next FOMC meeting that concludes on February 1. This would mark a further moderation in the pace of the rate-hike cycle, which, in turn, keeps a lid on the recent move up in the US Treasury bond yields and continues to weigh on the buck. Apart from this, a more hawkish commentary by European Central Bank (ECB) officials, signalling additional jumbo rate hikes in coming months, underpins the Euro and lends support to the EUR/USD pair. ECB Governing Council members Joachim Nagel and Gabriel Makhlouf said on Wednesday that they would not be surprised if interest rate increases continue into the second quarter after two expected moves in February and March. This comes after ECB President Christine Lagarde earlier this week repeated the recent policy guidance and said that the central bank will keep raising borrowing costs quickly to slow inflation, which remains far too high. Hence, the market focus will remain glued to next week's key central bank event risks - the outcome of a two-day FOMC meeting on Wednesday and the ECB decision on Thursday. The ECB, meanwhile, is expected to remain more hawkish. The aforementioned fundamental backdrop favours bullish traders and suggests that the path of least resistance for the EUR/USD pair is to the upside. That said, the prevalent cautious market mood - amid concerns about a deeper global economic downturn - lends some support to the safe-haven greenback. This, in turn, might cap any meaningful upside for the major in the absence of any relevant market-moving economic releases from the Eurozone. Technical Outlook From a technical perspective, bulls might wait for some follow-through buying beyond the April 2022 peak, around the 1.0935 area, before placing fresh bets. The EUR/USD pair might then accelerate the momentum towards reclaiming the 1.1000 psychological mark. The momentum could get extended further towards the 1.1070 intermediate hurdle en route to the 1.1100 round figure. On the flip side, any corrective pullback might find decent support near the 200-hour SMA, currently around the 1.0850-1.0855 region. Failure to defend the said support might prompt some intraday selling and drag the EUR/USD pair towards the 1.0800 mark. This is followed by the 1.0780-1.0775 horizontal resistance breakpoint, now turned support, which should act as a pivotal point. A convincing break below the latter should pave the way for a slide towards testing the next relevant support near the 1.0700 mark. Some follow-through selling will negate the positive outlook and shift the near-term bias in favour of bearish traders.

Trading in the US was eventless, except for the wild moves that marked the opening bell at the NYSE. The S&P500 swung around the 4000, without any major moves up or down, as investors remained undecided faced with mixed company earnings, and mixed economic data. Microsoft announced better-than-expected results yesterday, but the 5% rally in the afterhours trading rapidly faded. Tesla is due to announce its earnings today. In the FX, the US dollar remains under the pressure of soft data, and worryingly softening Fed expectations. The EURUSD is testing the 1.09 resistance on encouraging PMI data, while sterling is softer on growing slowdown worries. In Canada, the Bank of Canada (BoC) is preparing to announce its final 25bp hike. The dollar-CAD puts increasing weight into clearing the 1.3350 support, but crude oil is not helping, as the price of a barrel of American crude continues bumping its head against the solid $82pb wall, the 100-DMA, without being able to break it to the upside.

Dollar Index is ranged below 102 and has some scope to fall to 101 while Euro has moved above 1.09 and looks bullish. Pound can test 1.22 in a correction followed by a rise back to 1.24/25. EURJPY looks bullish to 143 while USDJPY could be ranged below 132. Aussie can test 0.72 on sustained trade above 0.71. USDCNY needs to break and sustain above 6.80 to move up further after its holidays. USDRUB continues to remain within 68-70 region. USDINR rose sharply to close higher yesterday. It is to be seen if it can manage to rise further from here to 81.85-82.00 or fall back to 81.50 or lower levels. EURINR can rise to 89. The US Treasury and the German yields have declined sharply and can fall more before a reversal is seen. The 10Yr GoI lacks momentum and looks vulnerable for a fall while the 5Yr is mixed and can go either way from here. Dow is getting support near 33300 which leaves the chances high for it to break above the immediate resistance and rise further on the upside. DAX has declined but may remain bullish while above the support at 15000. Nikkei is hovering below the resistance at 27400. Shanghai remains closed. Nifty continues to remain stuck between 18000 and 18200. Brent has declined but downside could be limited to $85. WTI has also come down failing to break above the resistance at $82.50. Gold may remain ranged while below the resistance at 1950. Copper is trading in a narrow range of 4.3-4.2 range. Silver is slowing rising within its 22.50-24.50 range. Visit KSHITIJ official site to download the full analysis

Strengthening PMI figures in the US and Europe have done little to help boost sentiment, as traders await the key Microsoft earnings report, says Joshua Mahony, senior market analyst at online trading platform IG. Equities lose traction despite some encouraging PMI figures “Equities find themselves in the red once again, as investors struggle to gauge whether todays set of mixed PMI surveys provide grounds for optimism or pessimism. Eurozone services brought the one notable area of outperformance, as the sector unexpectedly rose back into expansion territory. However, despite improved readings across both manufacturing and services sectors in the US, it is a case of good news is bad news as it eases pressure on the Fed to consider pivoting anytime soon. ” Microsoft earnings due, with big tech expected to see demand suffer “Microsoft earnings provide the big corporate story of the day, with investors and traders alike expecting to see the giant lose traction on both earnings and profit-front. The decision to slash 10,000 jobs does highlight a bloated business which had grown its workforce by a whopping 77,000 since the beginning of the pandemic (+47%). Today’s Microsoft earnings report is expected to highlight the need to bring costs under control, as rising interest rates and recession fears bring concerns that demand will collapse over the course of 2023. ”

At the conclusion of the latest WEF meeting in Davos, many of the leaders there were optimistic that the world would avoid a recession. Or, at least, if there was a recession, it would be short and shallow. A substantial portion of that optimism relied on an expectation that China would rebound, now that it was putting covid restrictions away. The meeting happened right after the latest GDP figures from the world's second largest economy, which were well above expectations. That helped offset some of the negativity that would be expected when the US reported slower than expected industrial growth. So, it begs the question: Are major investors looking at this as the bottom? Or is there further downside? What to look out for One of the clues could be in PMI data, to see where advance trends in the economy are headed. Over the last several months, most major economies were reporting PMIs below the 50 level, that indicate contraction. But the latest consensus shows that indicator might be starting to rise again, particularly in Europe. Europe's ability to keep up with energy demand has helped boost optimism in the shared economy, with stocks moving to 9-month highs. If PMIs were to move above 50, it could provide further impetus to the notion that the ECB will keep hiking, and support the Euro. Meanwhile, if PMIs in the US were to show a similar trend as industrial data, it could weaken the greenback. Key data points Australia's Manufacturing PMI is expected to fall to 49.5 from 50.2, entering contraction for the first time since the pandemic. This despite reports of thawing relations between Canberra and Beijing which are expected to increase trade. Services, on the other hand, are expected to tick up though remain in contraction at 47.5 compared to 47.3 prior. French Manufacturing PMI is forecast to improve to 49.7, up from 49.2 prior. That's only marginally in contraction. France is the first major EU company to report, and could then set the tone for optimism if the result were to come in above expectations. Services PMI is expected to do even better at 49.8, up from 49.5 prior. German Manufacturing PMI is expected to also improve, but remain in worse condition than France, at 47.8 compared to 47.1 prior. Services, on the other hand, are expected to almost return to expansion at 49.6 compared to 49.2 prior. The latest news on German energy reserves has been positive, but the last few days have seen cold weather in Europe, with expectations it could continue. Coinciding with the PMI survey, that could dampen the optimism among executives in Europe's largest economy. UK Manufacturing PMI is expected to stage a marginal improvement though remains firmly in contraction at 45.5 compared to 45.3 prior. The persistent strikes and reports that even more are expected in February have contributed to pessimism in the industrial sector. Services, on the other hand, are forecast to remain in contraction by the bare minimum at 49.9. US Manufacturing PMI is forecast to stay firmly in contraction at 46.2, unchanged from December. Services PMI is expected to show a marginal improvement to 45.0 from 44.7 prior. A beat of expectations would come as a larger surprise to markets, given how much of the other data has been pessimistic.