Currency War is Back

Daily Analysis - 16/02/2018

Currency War is Back


As the Asian market is closed due to their New Year celebrations, the US Dollar continues losing momentum while other major currencies rise sharp as the Markets are recovering. Warren Buffet’s bet on Apple push the tech-Giant higher.

US Dollar continues the Dive

The U.S. dollar on Thursday was on course for a fourth-straight losing session as worries over twin deficits in the United States mounted amid a government spending splurge and large corporate tax cuts. The dollar is trading near 3-year lows. The greenback jumped on Wednesday after the CPI reading showed U.S. inflation was stronger than expected for the month of January, boosting expectations that the Federal Reserve could increase interest rates as many as four times this year. Meanwhile, it was also accompanied by an unexpected drop in U.S. retail sales. Nevertheless, investors will still watch for signs of a sustainable rise in consumer prices. But it quickly turned lower, eventually continued loses for 6-Days in a row against a basket of major currencies. The dollar added to those losses on Thursday, with the index hitting a two-week low of 88.585. The U.S. national debt recently topped $20 trillion, while the 2019 fiscal deficit is projected at near $1 trillion, including deficit-financed tax cuts and two-year spending caps that Congress passed last week. As inflation is picking up in almost all developing countries, European Central Bank, Bank of England & Bank of Japan move closer to tightening their policies, bund, gilt & JGB yields will rise faster than Treasuries, making the Euro, Sterling and Yen more attractive than the US Dollar. Major data on the deck regarding the USD is the building permits at 13:30 a.m. GMT, with economists forecast to be 1.29 million building permits were issued by the government in the month of January.


Positive Earnings are back in the game

U.S. stocks extended their winning streak to five days, led by blue-chips Apple and Cisco, as investors shrugged off fears of rising inflation and hunted for opportunities after last week’s sell-off. Even though the Dow Jones traded down 84 points at its session low; Dow gained more than 300 points, with Boeing being the biggest contributor of gains. The S&P 500 added 1.2%, with financials and tech as the best-performing sectors. After falling as much as 0.2% in the beginning of the session, NASDAQ rose 1.6%. Gains in Amazon, Netflix and Alphabet boosted the heavy-tech index. The major averages all closed sharply higher on Thursday, climbing back further from the correction levels hit last week where the “Buy the Dips” rolled back in the trading arena. From the Earnings Calendar, Cisco Systems reported better-than-expected earnings and the stock jumped 3.3%. The company also posted its first year-over-year revenue increase in more than two years. Last Thursday, the indexes dropped 10% below their record highs set on January 26th. Investors and traders shock was mainly due to a surge in interest rates to levels not seen in years.


Apple is Warren Buffet’s top investment

Warren Buffett’s Berkshire Hathaway made the iPhone maker its top investment. Berkshire's latest announcement comes at an interesting time for both Apple and IBM. The legendary investor rarely bets on tech and his move has been a headline in among all traders as they tend to follow his strategies. Warren Buffett's conglomerate has increased its stake in Apple while gotten rid of almost its entire IBM stake. The Apple holdings increased by 23.3% to 165.3 million shares, according to SEC filings, and dumped about 94.5% of its IBM holdings, leaving just 2.05 million shares. Even though Buffet still carries a flip phone, he told CNBC that he was more certain about Apple's future than IBM's. IBM and Apple, the rivals since the 1980s, have taken very different paths over the years. IBM has struggled with trends in enterprise technology, while Apple has become a dominant force in consumer electronics.


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