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Consumers Seem to Have Their Confidence Back

Miguel A. Rodriguez
Miguel A. Rodriguez
26 July 2023

Good earnings reports pushed North American stock indices up yesterday while the publication of the consumer confidence figure was well above expectations. Now investors will be waiting to hear on updates on the US interest rates after members of the Federal Open Market Committee (FOMC) meet today.  


North American Stocks Rise Ahead of FOMC Meeting 

The strong performance of businesses like Verizon Inc. and General Electric, which released profits before the session opened, helped the North American stock indices continue to gain somewhat yesterday.

The Federal Reserve's (Fed) decision, which will be made following today's FOMC meeting, will be the most significant development for investors. 

US Interest Rates Expected See a 25 bps Hike 

The Fed is expected to raise interest rates by 25 basis points today, according to the futures market, but what will have the biggest impact on market assets will be what the meeting report and Jerome Powell's press conference remarks. Opinions are divided on this matter. There are those who think that this will be the last rise in rates, or that at least there will be a pause in the next meeting, and those who bet on a continuation of up to even 6% in federal funds.

Will Rates Continue to Rise with GDP Growth Around 2%?

Price increase is still high even if inflation data has been steadily declining. The Fed's goal inflation rate of 2% is still very distant from being reached by the underlying data on personal consumption expenditures. That would be sufficient justification for the Fed to keep raising interest rates, especially given that the US economy continues to be solid, with GDP growth hovering around 2% and the labor market at full employment. 

The Consumer Confidence Figure Came in at 117.0 

The consumer confidence figure, which was released yesterday, unexpectedly increased to 117.0, considerably above the predicted 111.8. Another indication of the economy's strength.  

Additionally, crucial economic data will be made public this week, including the Q2 GDP and June's Personal Consumption Expenditure.  

Yesterday was a day of minimal volatility for US Treasury bonds, as the yield on the 10-year bond only slightly increased. This contributed to the Dollar being relatively still.

Oil Continues to Rise on Expectations of a Growing Chinese Economy 

China is the world's largest oil consumer, and after news broke that the government was putting together fiscal stimulus measures to increase domestic demand, oil prices rose for the fourth day in a row on higher prospects for the Chinese economy.  

On a technical level, the price of crude oil is approaching a price concentration that should serve as resistance around $80.

DMO 26.07.2023 graph.png

Oil monthly trading chart July 26, 2023. Sources: Bloomberg, Reuters

Key Takeaways

  • The North American stock indices rose yesterday
  • Earnings reports by Verizon Inc and General Electric were positive
  • Markets wait to hear the Fed’s interest rate decision
  • Investors will listen for hints about expectations of ongoing rate hikes from Powell
  • Price growth is still high in the US economy, while GDP and the labor market are strong
  • The consumer confidence figure came out at 117.0, above the expected 111.8
  • Investors will be waiting for GDP for Q2 and the Personal Consumption Expenditure for June this week
  • US Treasury bonds slightly increased yesterday
  • Oil rose for the fourth consecutive day
  • Chinese government announces the preparation of fiscal stimulus measures

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Miguel A. Rodriguez
Miguel A. Rodriguez

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.