EUR/USD, USD/JPY flows - Free cash flow drives mixed tech reactions; ECB next up
Nasdaq net lower out of earnings, Google weighed by free cash flow, Microsoft bolstered
Focus turns to ECB and whether financial conditions focus leans tone less hawkish
No huge surprises from the Fed yesterday, leaving things pretty level heading into the next event today, the ECB.
In the end, it was probably the ‘monetary medicine is starting to work’ comment that the market latched onto for its novelty. And while we do think there is likely too much tightening priced in by the market, in terms of the presser and statement that one remark should not be over-inflated in what was still a Fed seeing strong growth and inflation too elevated. Whether it would have taken the same decision to 'gather more information' this month in another year without an impending midterm is another question.
Other main US interest coming from earnings where AI cash burn and free cash flow is becoming more and more prominent, Google/Alphabet sold back after coming in at -$9bn rather than breakeven on that metric, while Microsoft beats at $18.6bn showing better monetisation of AI and cloud. Net that has Nasdaq off over 1%, rolling back from its recent bounce and sticking to a 2-week range. The dollar has become more positive correlated sensitive to tech risk sentiment of late, so one to watch.
Today’s big focal point is the ECB. Policy is seen firmly on hold this meeting but the real interest is judging whether the signalling remains 'business as usual' with energy/Iran spillover dominating. Or whether the recent discussion of financial conditions gains more prominence, to deliver an overall somewhat more dovish slant.
EUR/USD retains a bearish structure overall and needs to be clearing 1.1150/1.1200 congestion to imply that fast money event trade profit-taking / buy the facts is taking short-term precedent. Otherwise the heavy feel remains on the recent new lows ahead of the big figure.