Markets Week Ahead: Nasdaq 100, S&P 500, Gold, US Dollar, NZD/USD, RBNZ, Thanksgiving
Global market sentiment was a mixed bag last week. It was a relatively disappointing 5 days for Wall Street as the tech-heavy Nasdaq 100 sank 1.57% as the S&P 500 declined 0.69%. Things were looking relatively bright in Europe. The DAX 40 and FTSE 100 climbed 1.46% and 0.92%, respectively. In the Asia-Pacific region, the Nikkei 225 weakened by 1.29% as the Hang Seng soared by 3.85%.
Wall Street’s relatively disappointing performance compared to the rest of the world was likely due to a combination of Fedspeak and economic data. While Fed officials have been alluding to a slower pace of tightening, they have also been underscoring the case for ongoing rate hikes. Meanwhile, US retail sales surprised higher, highlighting the economy’s resilience in the face of rising interest rates.
As a result of rising Fed rate hike bets last week, the US Dollar found some momentum against its major peers – see chart below. The British Pound was mostly unscathed despite a UK budget announcement that involved elements of fiscal tightening to help fight off surging inflation. Gold and crude oil prices weakened.
Markets are heading into a restrained trading week due to the Thanksgiving holiday in the United States. While Wall Street will be closed just on Thursday, expect lower levels of activity and liquidity in the days before and after. This doesn’t necessarily mean that volatility will be restrained, but the economic docket is light.
The most notable event risk is FOMC meeting minutes, which may continue underscoring the case for tightening, albeit at a slower pace. The European Central Bank’s equivalent will also cross the wires for the Euro. The Reserve Bank of New Zealand is expected to raise rates to 4.25% from 3.50%, opening the door for NZD/USD volatility. What else is in store for markets in the week ahead?
How Markets Performed – Week of 11/21
GBP/USD is eyeing 1.2000 again as a resilient Sterling and a weaker US dollar give the pair a lift.
The Australian Dollar was rag-dolled by US Dollar gyrations last week as data and geopolitics had markets running from pillar to post, second-guessing where the Fed is headed.
Bleak week ahead for the euro as EUR/USD seeks fundamental catalyst, while ECB tug of war continues between doves and hawks.
Next week the RBNZ decides to hike by 50 or 75 bps where forward guidance remains key. Stubborn inflation and a worsening global outlook complicates the decision.
The Dow Jones, Nasdaq 100 and S&P 500 took steps back last week as Fedspeak and retail sales underscored a hawkish central bank. Thanksgiving brings illiquidity, but what about volatility?
Gold and Silver have both enjoyed significant upside rallies of late. Both remain at risk of deep retracements in the week ahead with the dollar index likely to be key.
The recent rally in the S&P 500 and the Dow Jones Industrial Average could be about to pause as they test crucial hurdles. What are the levels to watch?
GBP/USD’s rise above key resistance at the September high raises the odds that the worst could well be over. What are the key levels to watch?
The Japanese Yen’s recovery has all but stalled this past week. Without USDJPY leading the way with the brute force of its liquidity and other Yen crosses never really turning joining the turn, Japanese officials’ fears of a return to 150 may start building quickly.
The US Dollar set a fresh low on Tuesday but bears weren't able to take control after, with a series of higher-lows showing in USD on the daily chart into the end of the week.
--- Article Body Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
--- Individual Articles Composed by DailyFX Team Members
To contact Daniel, follow him on Twitter:@ddubrovskyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.