(24 JULY 2019)DAILY MARKET BRIEF 1：Earnings in focus ahead of tomorrow ECB meeting

After a solid start into the week, global equities took a breather on Wednesday, at least during the European morning, as earning season is in full swing. Investors are impatiently waiting the publication of a fresh batch of earnings, including At&T, Boeing and Caterpillar. There is therefore a good chance to see increased market volatility especially for the Dow Jones index. At the time of writing, S&P 500 futures were down 0.30%, the Nasdaq fell 0.55%, while European indices were treading water despite positive surprise from Peugeot (+0.78), Daimler (+0.75%) and even Deutsche Bank (-3.75%). In Switzerland, most of companies reported better-than-expected results with Lonza rising 2% and Sulzer up +1.30%. EFG slid -8.27% amid net income contracted almost a third over the last twelve months. The SMI is down 0.10%.
In the FX market, the Australian dollar was the worst performer as it gave up another 0.35% against the buck. AUD/USD fell from $0.7005 to $0.6980 during the Asian session as the case for another rate cut by the RBA in August builds up. Since 19 July, the Aussie dropped 1.50% against the buck. We anticipate further loss for the Australian dollar, with the 0.69 threshold as next target.
The greenback continued to rally ahead of next week FOMC meeting. The continuous appreciation of the dollar suggests that investors anticipates that other central banks will act more aggressively than the Fed when it comes to cutting rates and expanding quantitative easing. Indeed, the ECB that is holding its July meeting tomorrow is expected to restart quantitative easing and to cut rates eventually. According to the money market, there is a 43% chance of a 10bps cut to the deposit rate tomorrow. This probability rises to 82% for September, 89% for October and 92% for December. Accordingly, the single currency kept moving lower with EUR/USD hitting a fresh multi-month low of 1.1127, down 0.12% on the session. We expect the ECB to come out much more dovish than the Fed would at its meeting next week. Against such a backdrop, the buck should continue to appreciate.