Markets Week Ahead: EUR/USD, Nasdaq, Gold, Fed, Earnings, GDP & Inflation
Markets were choppy for the most part this past week. Major stock indices traded broadly sideways as did gold and crude oil prices, though currency volatility seemed to pick up quite a bit. The Nasdaq and S&P 500 Index were little changed on balance despite reports that US President Joe Biden plans to propose a 43.4% corporate tax rate. The FTSE 100 and DAX 30 peeled back slightly from their latest swing highs, declining -1.1% and -1.2% respectively, as bulls eased off the gas pedal. Euro price action was fairly muted during the ECB rate decision, but the bloc currency finished the week strong against key FX peers like the US Dollar and Pound Sterling.
EUR/USD spiked 115-pips to a seven-week high, for example, while EUR/GBP gained 55-pips to extend its rebound off 14-month lows. US Dollar selling pressure accelerated as widespread weakness sent the broader DXY Index spiraling nearly -0.9% lower. This seemed to follow more softness across Treasury yields, which weighed negatively on US interest rate differentials. The Canadian Dollar saw an influx of demand mid-week after a fairly hawkish BoC statement revealed that the central bank is tapering its QE program and also bringing forward its next rate hike forecast from 2023 to the second half of next year.
Looking to the week ahead, we can see that the economic calendar is littered with high-impact event risk and data releases. Traders will likely be keeping a keen eye out for expected monetary policy updates from monetary policy updates from the Bank of Japan and Federal Reserve. The BoJ and Fed are scheduled to release their latest interest rate decisions on 27 April at 03:00 GMT and 28 April at 18:00 GMT, respectively. Inflation data is expected is expected out of Australia and the Eurozone next week as well.
Market volatility could also intensify around 1Q GDP reports due from major economies like the United States and Germany. Not to mention, earnings season is set to kick into full gear with quarterly results expected from tech stalwarts like Tesla, Microsoft, Alphabet’s Google, Facebook, Apple, and Amazon among several others. The upcoming OPEC+ meeting stands to weigh notably on the direction of crude oil. Additionally, President Biden is on deck to address congress in a joint session on Wednesday where he will likely tout his $2.3-trillion infrastructure package and overall successful vaccine rollout. What else is in store for markets in the week ahead?
The US Dollar remains in a challenging environment as corporate and capital gains tax hike bets bring the Federal Reserve into the spotlight as the April meeting nears.
Strong Q1 earnings and upbeat economic data may shelter the US stock market from tax headwinds. Investors are eyeing FAANG results this week amid worsening pandemic situations elsewhere in the world.
Last week saw EUR/USD break above 1.20 for the first time since early March; now it will likely pause for breath before possibly strengthening further.
The cryptocurrency market took a sharp leg lower overnight, with the alt-coin space hit particularly hard. Is this the latest chance to buy cheaper stock?
The Federal Reserve interest rate decision may keep the price of gold afloat as the central bank relies on its non-standard tools to achieve its policy targets.
The Mexican Peso holds its ground against the US Dollar despite slow vaccinations and a move away from risk.
The US Dollar weakened for the third consecutive week, with the DXY index dropping 0.86%. Now, the Greenback faces technical support that may end the trend lower.
Gold posts a third weekly rise for the first time since December, falling real yields bode well for gold.
Cable broke out of a bull-flag last week, but spent a few days retracing that initial move; look for the outlook to remain bullish above longer-term trend support.
Although the longer-term technical outlook for crude oil prices remains skewed to the upside, fading bullish momentum could see a period of consolidation ensue in the near term.
US DOLLAR WEEKLY PERFORMANCE VS MAJOR FX PEERS & GOLD
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