Peak of the USD may take a few more quarters, the rise in COVID-19 cases in China is weighing on US stocks, the use of space for security
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Summary:
- The USD may take a couple more quarters to peak.
- COVID-19 flare-ups in China rekindled worries about slowing growth.
- Russia's invasion on the Ukraine is proving how important space is for security.
USD peak may come in the coming quarters
Goldman Sachs (GS) warned in a research report on Friday that investors eager to predict when the dollar should peak may need to wait a few more quarters. According to historical cycles, peaks in the dollar are often accompanied by a "trough in measures of U.S. and global growth" and a loosening Federal Reserve, according to Goldman. According to Goldman, a dollar top would still seem to be "several quarters away," and the bank expects the Fed to wait until 2024 before starting its easing program. It also stated that the U.S. economy is not projected to soon reach its low point.
The U.S. investment bank observed that despite a number of significant rate hikes, high inflation and consistent U.S. economic growth have supported the dollar. Estimates of the cyclically neutral rate have risen as a result of the Fed's admission that the idea of a "restrictive" policy rate is a changing objective. In line with the Fed, Goldman economists now anticipate a longer hiking cycle and an even higher terminal rate.
While the smaller G10 economies are more sensitive to higher rates or changes to policy rates due in part to the rise in variable rate mortgages, the euro area continues to face significant challenges from energy shortages. The U.S. economy, on the other hand, has a better outlook and might be less sensitive to higher rates, according to Goldman, which should support the dollar.
*U.S. DOLLAR 'TRUE' PEAK STILL A COUPLE OF QUARTERS AWAY: GOLDMAN SACHS - https://t.co/mBlo3F3hSq $USD 🇺🇸 🇺🇸 pic.twitter.com/YAo7OFeBTV
— Investing.com (@Investingcom) November 21, 2022
US stocks in the wake of a rise in COVID cases in China
The major Wall Street indexes were expected to open lower on Monday as COVID-19 flare-ups in China rekindled worries about slowing growth. In contrast, Disney shares surged as investors praised Bob Iger's unexpected return to the top job. Beijing issued a warning that the pandemic was posing its most serious test yet, closing down businesses and schools in hard-hit areas and tightening entry regulations as infections grew both locally and nationally.
In premarket trading, shares of American casino operators with operations in China fell between 3.3% and 5.8%. These operators include Wynn Resorts (NASDAQ:WYNN) Ltd, Las Vegas Sands (NYSE:LVS) Corp, MGM Resorts (NYSE:MGM) International, and Melco Resorts & Entertainment (NASDAQ:MLCO) Ltd. American Airlines (NASDAQ:AAL) Group Inc. and Norwegian Cruise Line (NYSE:NCLH) Holdings Ltd., two companies in the travel industry, experienced declines of 0.7% and 1.2%, respectively. In spite of this, a 9.7% increase in Walt Disney (NYSE:DIS) Co was expected to prevent further drops in the Dow Jones Industrial Average following Bob Iger's appointment as the company's new CEO.
After some officials reaffirmed the commitment of the U.S. Federal Reserve to continue tightening monetary policy until inflation was under control on Wednesday, attention also turned to the release of the minutes from its November meeting.
*U.S. STOCK FUTURES DECLINE AS CHINA COVID CASES RISE; DISNEY JUMPS ON CEO CHANGE - https://t.co/v8TbZHlR6o pic.twitter.com/nv1fGxeHoN
— Investing.com (@Investingcom) November 21, 2022
Space and and security
The horrific Russian invasion of Ukraine has demonstrated just how important space is to our security. An invasion was foreshadowed in January by GPS imagery showing Russian forces gathering at the Ukrainian border. Satellite connections have kept frontline troops in touch with their leaders throughout the whole conflict. In the meantime, Ukraine's use of GPS-guided Himar rocket launchers has helped tip the scales of battle in their favor by enabling them to locate and eliminate Russian artillery and ammunition depots well behind enemy lines. This is the first significant conflict in which space-based technologies have been heavily utilized by both sides. It won't be the final.
Ukraine shows how space is now central to warfare https://t.co/tolg7XW4WH | opinion
— Financial Times (@FT) November 21, 2022
Sources: ft.com, twitter.com, investing.com
