(AI Video Summary)
January feels like it is officially underway now that volatility has picked up in comparison to the first two weeks of the year, fueled by higher than expected inflation in the US, European Union, and UK. This has caused bond markets to adjust their expectations for interest rate cuts in 2024, leading to a positive trend in the dollar. If US retail sales data is better than expected, the dollar could continue its rise.
The two-year Treasury yield has been trying to halt the sell-off, which is generally supportive of the dollar. Upcoming inflation data from Japan could affect the Bank of Japan's monetary policy stance should it also show signs of persistence. Inflation data on Thursday evening (23:30 GMT) will help determine if any policy changes are likely and if there could be a broader decrease.
Moving on to the stock markets, there has been a more cautious mood lately because of slightly higher inflation and geopolitical risks. The FTSE dropped sharply, possibly influenced by a higher demand for the pound sterling but global indices have been trending lower of late, with the S&P 500 showing a double top formation. If short trades gain confidence, the next level to look out for is 4607.
Economic data from China was largely disappointing, coming in below expectation. This has caused sell-offs in various regional indices affecting the Australian dollar, which is seen as a riskier currency. The Australian dollar has witnessed a strong move lower which suggests using caution when considering short trades as the currency is getting close to being oversold.
Lastly, the Pound Sterling has seen a positive movement, largely due to the higher UK inflation data. However, he notes that the strong US dollar could limit further gains. Resistance levels to watch are at 1.2736 and 1.2795. Snow finishes by highlighting the importance of upcoming US retail sales and Japanese inflation data, which will be key events to keep an eye on for the rest of the week.
