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US president is expected to speak in Congress on Tuesday evening

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Last week both the US stock prices and the dollar rose. On Monday, it was a day off in the US due to the holiday – the President's Day. On Tuesday, prices markedly rose in the US stock market due to good quarterly reporting of the largest retail network Wal-Mart. The US indices updated historic highs. The P/E ratio (market capitalization in relation to the total annual earnings of companies) for S&P 500 reached 17.8. This is markedly higher than the average historic level of 15. According to forecasts, the total earnings of the companies from the S&P 500 list for Q4, 2016, rose by 7.5%. On Tuesday, the dollar index increased after Loretta Mester and Patrick Harker, the Presidents of the Federal Reserve Banks of Cleveland and Philadelphia, reported about the need to raise the Fed rate in case of sustained positive trends in the US economy.

Early on Wednesday, the US dollar continued strengthening on the background of the publication of positive existing home sales data for January. However, the dollar closed the day lower. In the evening, the February Fed meeting minutes were released. They noted, that according to the majority of voting presidents of regional offices, there is no need to hurry to increase rates at least until the inflation and unemployment rate are under control. An additional negative for the US dollar index was the strengthening of the euro amid detention of assistants of the French presidential candidate Marine Le Pen. This reduces the chances of her victory. Marine Le Pen favors her country’s leave from the EU. On Wednesday, no single trend was observed in the US stock market. The Dow index slightly rose, while other indices dropped.

On Thursday, the weakening of the dollar continued. No significant economic data came out. However, after the Fed meeting minutes were released the previous day, the likelihood of the rate hike at the March meeting decreased from 27% to 22%. On Thursday and Friday, the prices continued moving sideways in the stock market. Investors expect the US president Donald Trump to give speech on February 28. Perhaps, he will reveal some aspects of his economic program. On Friday, the US dollar slightly strengthened allowing its index to close “in the black” for the third week in a row.

This week, investors’ attention will, of course, be mainly drawn to Donald Trump’s speech. Besides, on Tuesday, the US GDP for Q4 in the 2nd reading, trade balance for January and wholesale inventories, as well as consumer confidence index for February will come out. This data will likely set the direction of the US indices and the dollar till the end of the week. However, it should be mentioned that on Friday evening the Fed president Janet Yellen is expected to speak which may also affect market dynamics.

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