Markets Week Ahead: EUR/USD, Gold, Oil, Bitcoin, Dow, DAX, Inflation, RBNZ
Global markets were quite choppy this past week. This could follow signs of deteriorating risk appetite judging by recent performance of highly speculative assets. Bitcoin and Ethereum, for example, plunged deeper into bear market territory due to investors fleeing major cryptocurrencies en masse. Equities have been fighting headwinds as well with major stock indices struggling to maintain upward momentum. The Dow Jones closed -0.5% lower on the week, though the DAX managed to gain 0.1% after being down as much as -3.0%.
Crude oil prices faced notable selling pressure as commodity traders sank WTI -2.5% and Brent -3.1%. In addition to market sentiment softening broadly, this may be a reflection of traders betting on a potential Iran nuclear deal and spike in global oil supply that would likely follow. Shifting focus to other major commodities, we find that the price of gold extended 2.1% higher to trade around $1,875/oz. This brings the precious metal’s streak of gains to three-weeks straight.
Furthermore, US Treasury bonds saw some demand and pushed ten-year yields slightly lower despite FOMC minutes alluding to the threat of future Fed tapering. The dip in Treasury yields likely weighed negatively on USD price action. Across the board of major currency pairs, US Dollar weakness was felt primarily against the Swiss Franc, Euro, and Yen, but strength was seen relative to the Aussie and Kiwi. EUR/USD advanced 36-pips on the week while USD/CHF, USD/JPY, AUD/USD and NZD/USD declined by 35-pips, 42-pips, 54-pips, and 84-pips, respectively.
US DOLLAR WEEKLY PERFORMANCE AGAINST MAJOR CURRENCIES AND GOLD
Looking to the DailyFX Economic Calendar, we can see that event risk is pretty sparse for the week ahead. There are a few noteworthy items, though. A handful of FOMC officials – like Lael Brainard, Raphael Bostic, and Randal Quarles – are on deck to give remarks and could touch on their thoughts about inflation. Other key central bankers, such as the BoJ’s Kuroda, BoE’s Tenreyro, and ECB’s Guindos, will be giving speeches too. Not to mention, the Reserve Bank of New Zealand is due to announce its latest interest rate decision with RBNZ Governor Adrian Orr expected to provide some additional color on monetary policy guidance during his follow-up press conference.
The release of consumer confidence data could be worth watching out for with the reports potentially swaying domestic market sentiment. Traders might want to keep tabs on infrastructure spending headlines as well after the Biden administration suggested a $1.7-trillion counterproposal to the original $2.3-trillion package. Republicans argued that the latest offer is still ‘too high’ of a price tag. That said, core PCE inflation data out of the US looks like the big-ticket item scheduled to cross market wires Friday, 28 May at 12:30 GMT. What else is in store for markets during the week ahead?
US Dollar selling pressure prevailed and steered the DXY Index -0.3% lower last week in spite of Fed taper talks growing more heated. Eyes on inflation and yields to gauge where USD heads next.
Technology stocks cruised into the weekend with a positive mood, as inflationary pressure eased alongside commodity prices. The Nasdaq 100 index is positioned for a catch-up rally if this narrative sustains.
Fresh remarks from BoE officials may keep the British Pound afloat amid the growing discussion within the central bank to scale back the emergency measures.
Iran nuclear deal optimism sparks pullback in crude oil prices, but unlikely to derail outlook.
Wednesday’s violent cryptocurrency capitulation has shattered this year’s bull surge and the market may take a long time to recover if it recovers at all.
Gold strength may continue in the near term as Fed stands firm on their transient inflation outlook. Nevertheless, hotter-than-expected PCE figures on Friday pose a potential headwind to XAU/USD.
The Euro appears to be consolidating after recent upside moves; there is plenty of room in futures positioning for speculators to drive prices higher.
USD/CAD has been trading around the 2017 low for nearly two weeks; risk still tilted in favor of more weakness.
Gold surged more than 12% off the yearly low with then XAU/USD breakout now eyeing key technical resistance. These are the levels that matter on the Gold weekly chart.
Heightened volatility and modest losses have seen the major indices test key trendlines that, if broken, could open the door to deeper declines. In the week ahead, bulls may look to make a stand at these levels.
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