Nasdaq 100, gold, US dollar, Fed, GDP, EUR, AUD, inflation data
Global market sentiment continued to improve last week. On Wall Street, the Nasdaq 100, the S&P 500 and the Dow Jones gained 3.49%, 2.54% and 1.98% respectively. In Europe, the DAX 40 and FTSE 100 climbed 2.49% and 1.04% respectively. That’s when Australia’s ASX 200 rose 1.95% while Japan’s Nikkei 225 gained 2.59%.
Improved risk appetite rattled the safe-haven-linked US dollar, with the DXY Dollar Index down 1.31% last week. This is the worst performance since the end of May. Still, the anti-risk Japanese yen outperformed. USD/JPY fell 1.71%, the most since June 2020. The strength of the JPY was likely due to external factors.
Treasury yields fell across the board as markets reinforced dovish expectations for Federal Reserve monetary policy. Now markets are back to pricing in 2 rate cuts in 2023, indicating a Fed pivot. This is despite headline inflation in the United States of 9.1% year-on-year. US real GDP estimates for 2023 are down, perhaps a sign markets are seeing the Fed capitulate to recession fears.
In the coming week, we may have a better idea of who is at the helm. A hawkish Fed could easily dissipate dovish estimates to the upside, bringing volatility back to stock markets and likely benefiting the US dollar. Apart from the central bank, the US will also release GDP and PCE data. The latter is the central bank’s preferred inflation indicator.
Gold prices did well last week, likely due to weak US Dollar and Treasury rates. But, due to the busy week ahead, XAU/USD volatility could still be ripe. Crude oil prices fared rather poorly, likely due to lower global growth expectations. Earnings season is still underway, and better-than-expected results may have contributed to market optimism.
Elsewhere, Australia will release its second quarter inflation rate. An impression of 6.3% y/y is observed, against 5.1% previously. This probably explains the increasingly aggressive Reserve Bank of Australia. Will the AUD benefit? Inflation data for Germany and the euro zone are also available for the euro. What else is in store for the markets in the coming week?
PERFORMANCE IN US DOLLARS VS. CURRENCIES AND GOLD
Euro Forecast (EUR/USD) – A Week Full of High Risk Events
EUR/USD is heading for a week full of important data releases and events from both sides of the pair that will further increase volatility.
AUD/USD Weekly Forecast: Resilient Aussie Supported by Commodities Despite PMI Failure, Fed in Focus
A strong close last week sets AUD/USD up for the data-rich week ahead, with focus on the Fed.
Crypto Forecast: BTC and ETH Lead Rally as Announced “Merge” Date; Upcoming risk event
Too soon to call the end of the Crypto winter… is the Ethereum “meltdown” driving the rally?
Crude Oil Fundamental Forecast: Demand Destruction Trumps Supply Concerns
WTI prices have fallen quite significantly as recession fears mount despite supply remaining extremely tight. The Fed rate hike next week could add to that.
Weekly Stock Market Forecast: S&P 500 and DAX 40
Bear market rally falters as US data slows. The Fed is expected to hike another 75 basis points
GBP/USD rate rebound vulnerable to hawkish Fed forecast
The Federal Reserve’s interest rate decision could undermine GBP/USD’s recent rebound if the central bank steps up its efforts to fight inflation.
USD/JPY Outlook: Will the Japanese Yen Continue to Weak Against the US Dollar?
USD/JPY has risen sharply this year, but may soon begin to correct lower on signs that Fed policy has peaked amid a rapid slowdown in US economic activity.
Gold Price Forecast: XAU/USD reversal could be premature. Eyes on the Fed, GDP and PCE
Gold prices rallied last week, but markets could get ahead of themselves. A hawkish Federal Reserve, US GDP and PCE data could weigh against XAU/USD in the week ahead.
US Dollar Technical Forecast: US Dollar Exhaustion – DXY Leads the Fed
The US Dollar ended a three-week winning streak with DXY reversing over 1.5% of technical resistance. Key levels on the weekly technical chart towards the FOMC.
Gold & Silver Technical Forecast: Charts Indicate Further Losses Ahead For XAU, XAG
Gold and silver prices broke their weeks-long routs, but prices struggled to hold onto their gains. The charts of XAU and XAG suggest that the path of least resistance remains on the downside.
S&P 500, Nasdaq 100, Dow Jones Predictions for the week ahead
It was another strong week for equities. The Fed is waiting in the wings. Are they about to cave in the face of declining economic data?