Stock futures fell as disappointing earnings and forecasts from tech leaders halted a rally in global equities. Weak numbers from Meta to Qualcomm Inc. and Spotify Technology SA rattled investors who had bet that a strong earnings season would keep stocks attractive and offset some of their lingering concerns, including Fed tightening and stubborn inflation.
Labor market figures from the ADP agency, which preceded Friday's expected official jobs report, showed that U.S. business employment declined in January by the most since the early days of the pandemic. The coronavirus variant dealt a swift, but likely temporary, blow to the labor market. The Bank of England raised interest rates for a second consecutive meeting, raising the key rate 25 basis points to 0,5%. Officials also signaled they would begin reducing their bond holdings, halt reinvestments in their gold pile, and offload their corporate bond portfolio.
The European Central Bank (ECB) did not move its key interest rates as expected at its meeting this Thursday (0,00%). The deposit facility rate remains at -0,50%, and the marginal lending facility rate remains at 0,25%. Now, attention turns to ECB President Christine Lagarde and her press conference. The ECB should reiterate its willingness to be, like the Fed, pragmatic and agile, and be ready to intervene if inflation remains too high relative to its 2% target. Among the tools at the ECB's disposal, the first would be to halt net purchases. We believe that only after net asset purchases have been halted will the criteria for raising interest rates be considered.
The dollar (DXY) extended last week's gains and gained 0.34%, allowing the currency to trade back above the 96-point level, reaching 96.246 points. Safe-haven flows continue to dominate financial markets amid rising geopolitical tensions and renewed concerns about a global economic slowdown. Although the S&P 500 index closed the day in positive territory due to lower buying, U.S. stock index futures are trading lower on Tuesday morning. In this context, we forecast a tight daily trading range between 95.9 and 96.7.
The Colombian peso closed Wednesday's session losing ground against the dollar, closing at $3,935, up $10 and depreciating 0.2% after three sessions of gains. Despite the relative strength of oil prices, the pessimistic sentiment at the start of global stocks, and amid a monetary tightening process that has focused attention on developed central banks, we expect a trading range between $3920 and $3960 for the day.
The Mexican peso (MXN) opened the session higher, trading at MX$20.6067 with a high of 20.6337 in its European session. The dollar regained upward traction after several consecutive sessions of decline. Traders continue to await the US employment data on Friday, which will be key to any future decision-making by the Federal Reserve. In line with its market structure, the intraday trading range is expected to be narrowed between 20.54 and 20.68.
The Chilean peso (CLP) opened the day depreciating 0.38%, trading at 812.80 Chilean pesos per dollar. The Chilean peso began the day losing ground as investor expectations adjusted to the magnitude of the Fed's monetary policy. Meanwhile, the impact of the increased mortality rate due to the high number of infections caused by the Omicron variant in Chile and possible alternatives for its control continue to be evaluated. In this context, we expect a narrow daily trading range of 818.869–805.531.
The Peruvian sol (PEN) closed Tuesday's trading at S/3.8559. The currency pair appreciated 1% to 3.88 per US dollar, as the current situation in Peru has generated doubts and fear among traders following announcements by President Castillo, triggering a new political crisis. Following the resignation of Interior Minister Avelino Guillén, the president confirmed the reorganization of his cabinet. Former leader Mirtha Vásquez made public her resignation letter, along with Economy Minister Pedro Francke, rejecting Castillo's thoughts. In line with its market structure, the intraday trading range is expected to be limited between 3.825 and 3.885.
The Chinese Yuan (CNH) opened the session depreciating, trading at 6.3619 yuan per dollar, with the USD/CNH rising 0.10%. The yuan is back on the losing side after several positive sessions. The pair opened the session lower, guided by comments from Federal Reserve Chairman Jerome Powell, who stated that the Fed will continue to tighten monetary policy. The decline in the CNH is associated with a mixed market tone and rising Treasury yields, which are strengthening the dollar. In this context, we expect a narrow daily trading range between 6.3721 and 6.3539.
The euro (EUR) opens the day with a 0.20% depreciation at a trading price of US$1.1280. The European currency begins the day with further declines after posting four consecutive daily gains since Thursday. This comes after the European Central Bank reported inflation below its 2% target this week, considering it a temporary rather than permanent issue. This comes in a context where the dollar is advancing. In this context, we expect a narrow daily trading range between 1.134 and 1.124.
The British pound (GBP) began trading 0.37% higher at $1.3628, placing it in positive territory, breaking above the $1.3600 level. The pair opened the session higher, driven by expectations that the Bank of England will raise interest rates by 25 basis points; however, the final decision will be announced at its meeting on Thursday. It's important to note that the recent political drama in the United Kingdom could prevent investors from taking aggressive long positions on the pair, limiting its upside. A report on alleged lockdown parties in Downing Street is expected to be released this week, potentially deciding the fate of Prime Minister Boris Johnson. In this context, we expect a narrow daily trading range of 1.368–1.355.
The Japanese yen (JPY) opened the session higher at ¥114.9, with a 0.4% change against the dollar. The US currency regained traction after four consecutive days of decline. The moving averages are forming a potential bullish trend, generating a rise in the currency pair, although this movement must be confirmed today with a close above the trading level to confirm bullish signals. Based on the market profile, we expect a tight range between 113.7 and 115.2.
The Swiss franc (CHF) is opening the day with a 0.40% drop to 0.9220 francs per dollar. The European currency is starting the day in negative territory, although it has benefited primarily from the fear caused by the spread of the Omicron variant in the United States. This has led to a flight to safe haven currencies such as the Swiss franc and the Japanese yen as markets analyze the risk of the Fed's interest rate hike. In this context, we expect a narrow daily trading range between 0.926 and 0.918.
The Canadian dollar (CAD) is opening the day at C$1.2706, close to Tuesday's levels, trading inversely with the West Texas Intermediate (WTI) crude oil price. The currency pair showed a slight increase after crude oil futures prices weakened from seven-year highs of $7 per barrel ahead of the OPEC announcement. WTI is currently trading at $89.71, and the Canadian dollar is expected to consolidate following Friday's Canadian employment report. Based on its market structure, a tight trading range is expected between 87.46 and 1.2635.
The Australian dollar (AUD) opens the day with a 0.24% decline, reaching 0.7119, while approaching 0.7100. The pair started the day in negative territory, moving lower due to a surge in demand for the dollar on Thursday, which led to some selling around the AUD. Aside from this, a softer tone around the stock markets has further benefited the safe-haven US dollar and weighed on the perceived riskier Australian dollar. Investors are also awaiting decisions from the Bank of England and the European Central Bank. Against this backdrop, we expect a narrow daily trading range between 0.716 and 0.707.
The New Zealand dollar (NZD) opened the day with a 0.22% gain, trading at 0.6642. The pair opened the session higher, driven by the markets' guidance as the New Zealand employment report showed the unemployment rate fell from 3.3% to 3.2%, while the Labor Cost Index jumped two-tenths of a percentage point from the previous month to 2.6%, but below the 2.9% forecast. The RBNZ is expected to raise the Overnight Cash Rate (OCR) by 25 basis points at its February meeting. However, wage growth is lagging significantly, so the New Zealand central bank could decide to curb rate increases in 2022, allowing inflation to run rampant. In this context, we expect a narrow daily trading range of 0.668–0.66.
We are convinced that every investor should diversify their investments across a variety of asset classes, regardless of market environment or trend, and work closely with their financial advisor to ensure their portfolio is adequately diversified and that their financial plan supports their long-term goals, time horizon, and risk tolerance. However, diversification does not guarantee profit or protect against loss. The preceding information, as well as the individual companies and/or securities mentioned, should not be construed as investment advice, a recommendation to buy or sell, or an indication of an intention to trade on behalf of any Acciones & Valores SA product. The securities mentioned may or may not be part of Acciones & Valores SA funds. For a complete list of Acciones & Valores SA portfolio holdings, please refer to the most recent annual, semi-annual, or quarterly report on our website. This document is for informational purposes only. Acciones y Valores is not responsible for the interpretation of such information, given that it does not cover all the aspects that an investor might consider necessary or desirable to analyze their decision to participate in a transaction, given that it is presented in an abbreviated form. For complete and absolute accuracy, investors must consult all documents provided through the website. Likewise, investors must conduct their own financial and legal analysis before making any investment decision. The values and figures contained herein are obtained from market sources presumed to be reliable, such as Bloomberg, Reuters, and the Issuers. The ratings contained in this report should not be considered investment recommendations or substitutes for ratings issued by certified credit agencies such as Moody's or Standard & Poor's. These ratings are solely quantitative; they do not include qualitative factors and depend on the financial information available in the market at the time of preparation. The opinions, estimates, and projections in this report reflect the author's current judgment as of the date of the report, and it is clarified that the content of the information contained herein is subject to change without notice. The authors' compensation is not associated with the results of the report or the recommendations made. The presentation and any preliminary documents regarding the products mentioned herein do not constitute a binding public offer; therefore, both the presentation and any other documents are subject to supplement or correct.
Héctor Wilson Tovar García Macroeconomic Analysis
Research Manager wtovar@accivalores.com
Laura Daniela Triana Pulido Equity Analyst daniela.triana@accivalores.com
Daniel Herrera Hernandez Fixed Income Analyst daniel.herrera@accivalores.com
Juan Pablo Bejarano Holding Sector Analyst juan.bejarano@accivalores.com
Andres Felipe Campos, Retail Sector Analyst andres.campos@accivalores.com
Daniel Felipe Pardo Energy Sector Analyst daniel.pardo@accivalores.com
Juan Felipe Herrera, Financial Sector Analyst juan.herrera@accivalores.com
Back to blog
