US Dollar, Dow Jones, Gold Prices, Euro, British Pound: Markets Week Ahead
Sentiment in financial markets mostly recovered after fears around the coronavirus wrecked equities across the globe. The S&P 500, DAX and Nikkei 225 gained this past week, sending the pro-risk Australian Dollar to the upside on average aside from the US Dollar. Market mood ended on a cautious note Friday with a lack of a material increase in the Fed’s balance sheet.
Rising U.S. government bond yields throughout most of the past 5 days meant the markets were lessening dovish expectations from the Federal Reserve. This aided the US Dollar, which saw notable gains against some of its European peers such as the Euro and British Pound. Anti-fiat gold prices cautiously fell as sentiment-linked crude oil prices appeared to find a bottom.
China’s economy is expected to slow further amid the coronavirus outbreak and time will tell if the effects will be temporary or reveal deeper financial flaws. In the week ahead, the focus may turn to economic event risk and central bankers. Fed Chair Jerome Powell is to testify for Congress during his semiannual report while ECB President Christine Lagarde addresses the EU Parliament.
The Reserve Bank of New Zealand is expected to keep rates unchanged at 1.00 percent, but its forward guidance may spark NZD/USD volatility. Mexico’s central bank is anticipated to cut rates by 25-bp however. EUR/USD and GBP/USD may be closely watching growth reports from Germany and the United Kingdom respectively.
The Euro remains under downside pressure after a week when any short-term bullish sentiment was all but wiped out. Next week’s Euro-Zone and German GDP data may well confirm this bearish breakout.
The Australian Dollar rose after domestic interest rates were left alone even though the decision had been expected. It’s still under duress though and can’t hope for a similar RBA rescue this week.
The Mexican Peso appreciated a further 1.76% against the US dollar during this past week, but a short-term correction has come into play ahead of next week’s interest rate decision.
Crude oil prices may rise if Fed Chairman Jerome Powell’s congressional testimony and the US-China tariff reduction cool slowdown fears and boost the growth-reliant commodity.
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