Happy Friday, traders! Are you ready to trade at the end of the week? Here’s what you need to know before you start:
Corporate interest in currency hedging is spurred by firmer greenback
American multinational companies get down to reevaluating their currency hedging strategies following a leap in the evergreen buck for recent months because the impact of the stronger US currency starts influencing second-quarter corporate profits.
On Monday, a firmer greenback had Netflix Inc claimed as its first victim of the revenue season. Well, the American company that doesn’t hedge its profits with derivatives told that foreign exchange rates pushed its hopes on the 2018 operating margin to the lower end of the company’s target range.
In the second quarter the evergreen buck managed to soar more than 5% versus key trading partners' currencies, underpinned by soaring trade war tensions as well as a hawkish Fed stance.
The USD index that in the beginning of the second quarter had lost nearly 11% year-over-year, concluded the quarter almost intact on a year-over-year basis.
The greenback’s ascend has shown up as a surprise risk in the beginning of a firm American corporate earnings season. The matter is that foreign currency earnings of American multinational companies are worth less in US dollars when the evergreen buck is firmer.
Financial institutions reported that their inquiries from clients had recently soared.
The evergreen buck’s recent strength appears to be a steep departure from its last year’s weakening trend, when it underpinned large American companies and might have made managing currency risks less crucial.
Some market experts actually expect a soar in trade protectionism to spur the US currency in the near term that could mean more companies will probably cite the stronger greenback for future revenue weakness.
By the way, the key US financial institution has lifted interest rates twice already in 2018 and it’s believed to increase them at least two times by the end of 2018.
The first week of November promises to be eventful, as we have the Fed meeting, the BOE update, and the NFP release. Read more details here.
Last week several important economic updates influenced the Forex market. US preliminary GDP fell less than expected (0.6% actual vs. 0.7% forecast). Below you will find the key events to trade on during the week from August 29 to September 2.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.
2022 was rough: inflation, energy crisis, and plenty of other controversial situations…