Euro-Dollar Selloff Limited by Nvidia Results
- Written by: Gary Howes
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A strong dollar advance was crimped by Nvidia's results.
The dollar remains ascendant, but a strong set of results from Nvidia has at least limits the advance.
"The most important number in the world surprised on the right side of the ledger and the equity market ship is steadied for the time being," says Benjamin Picton, Senior Market Strategist at Rabobank.
With market sentiment improving, the dollar loses some of that safe-haven demand that has propelled it higher in recent sessions.
The euro to dollar exchange rate nevertheless faces a fifth consecutive daily decline amidst rapidly falling expectations for a Federal Reserve interest rate reduction next month.
The dollar has steadily advanced as odds fall, with the market seeing just a 35% chance of a cut next month, down from 50% 24 hours earlier.
The big drop in rate cut expectations follows the release of minutes covering the Federal Reserve's most recent meeting, which shows policy makers are leaning against a follow-up reduction.
Euro-dollar fell to 1.1517 on the day, but the losses would have been more notable were it not for the broader lift in investor sentiment that followed the release of Nvidia's latest trading update.
Above: EUR/USD downtrend intact.
"Much to the relief of equity bulls, Nvidia’s Q3 results reinjected positive sentiment into a market that had been reflecting concerns over potentially frothy valuations in the tech sector," says a market note from Lloyds Bank.
The dollar tends to advance when markets come under pressure, and a bad set of results from the lynchpin of the AI stock boom would have been negative for sentiment.
The solid results shored up investor confidence and denied the dollar an additional safe-haven tailwind.
"Nvidia produced results tailored with surgical precision to do just enough to keep the AI party rolling, but not so much that expectations become overblown and everyone gets the mother of all hangovers," says Richard Windsor, an analyst at Radio Free Mobile.
Underpinning what Windsor describes as a "set of excellent results" are revenues / EPS of $57.0bn / $1.30, comfortably ahead of expectations of $54.9bn / $1.26 and guided nicely for the coming quarter.
"The outlook is for more-of-same for at least a few more quarters, which will provide great relief to nervous investors," says Windsor.
The lift to investor sentiment will deny the dollar further impetus against the euro, but with further reductions in rate cut bets still possible, euro-dollar can come under pressure.
The immediate downside target is the November 5 low of 1.1469. "A break of 1.1469 would open 200-dma 1.1400 and August 01 low 1.1392 support," says Richard Pace, a Reuters market analyst.
