Markets Week Ahead: Nasdaq 100, US Dollar, EUR/USD, GBP/USD, USD/CAD, CPI Data
Global market volatility was rather mixed this past week. On Wall Street, the Nasdaq 100, S&P 500 and Dow Jones fell roughly 0.9%, 0.17% and 0.5% respectively. Across the Atlantic Ocean, the Euro Stoxx 50 and FTSE 100 gained about 0.2% and 0.6% respectively. In Asia, the Nikkei 225 was flat as the Hang Send Index climbed 1.8%.
The increase in volatility on Wall Street was likely due to October’s inflation print. Consumer prices grew 6.2% y/y, the most since the early 1990s. Historically, high periods of inflation tend to produce more volatility in stock markets. Having said that, the chase for returns is still active in a still-lose monetary policy world. Though the latter has been slowly shifting.
Demand flowed into the US Dollar in foreign exchange markets as traders doubled down on 2 Fed rate hikes by the end of next year. Treasury yields also pushed higher, with the 30-year rate recovering from July lows. Gold, which is at times viewed as an inflationary hedge, finally caught some demand as prices closed at a June high. Crude oil prices consolidated.
All eyes turn to Fedspeak in the week ahead to see how policymakers view the recent CPI report. Commentary from Charles Evans, Richard Clarida and more will cross the wires. If the central bank reiterates that inflationary pressures are transitory, it will likely take persistently elevated price readings to bring volatility into equities. US retail sales are also in focus.
EUR/USD, GBP/USD, USD/CAD and USD/JPY will be eying inflation data from the UK, Euro-Area, Canada and Japan respectively. f this data follows trends in the United States, global bond yields may continue rising along with hawkish monetary policy bets. Will that produce volatility and what else is in store for markets ahead?
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
The US Retail Sales report may generate a bullish reaction in the Dollar as the update is expected to show a pickup in household spending.
The Dow Jones, S&P 500 and Nasdaq 100 turn to Fedspeak as inflation fears brought volatility to stocks this past week. Still, the bull market remains intact amid underlying fundamentals.
The drop in EUR/USD last Wednesday was significant, taking the pair below 1.15 to its lowest level since July 21 last year. That has opened the way for further losses, to 1.14 and beyond.
FX markets pay attention to blowout US CPI, causing USD to rip higher. However, major USD pairs appear overextended at current levels
US Dollar Index surged more than 1.5% off the monthly lows with a major technical breakout in DXY ripping to fresh yearly highs. Levels on the weekly technical chart.
Stocks took a breather last week and next week will be about seeing whether a consolidation pattern will form or larger retracement develops.
Rising inflation has supported Gold and Silver’s recent rally but USD strength and rising yields push precious metals back towards key levels.
The British Pound has come under pressure, particularly against the dollar as we take a look at possible GBP trade setups for the week to come
Although oil maintains a bullish medium-term outlook, the short-term bias is slightly bearish as the White House weighs acting to lower the commodity price to cool red-hot inflation
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