Dow Jones, US Dollar, Gold, Euro, Fed, CPI, China

The market is emerging from an eventful week that included the May decision on Federal Reserve interest rates and the US employment report. Global stock markets fell after the US central bank rattled investors as it stepped up its fight against inflation. The Nasdaq-100 Index (NDX) fell 0.99% and the Dow Jones Industrial Average fell 0.24%. Treasuries sold off heavily following the FOMC, pushing rates higher. Bitcoin prices have fallenreflecting the sharp evaporation of sentiment towards risky assets.

Market-based bets on the Fed’s rate hike course were largely unchanged after Friday’s NFP. April’s consumer price index is expected to fall to 8.1% y/y on Wednesday. That would be down from 8.5% in March. A weaker-than-expected print may help ease some inflationary concerns. Either way, it is likely to inject some volatility into Treasury markets and influence Fed rate hike bets. Breakeven short-term rates fell throughout the week, reflecting easing concerns about rising prices amid aggressive central bank action. This hurt gold prices.

Risk aversion sentiment has spread to European markets which are already grappling with an environment tempered by the conflict in Ukraine. The Stoxx 600 index fell 4.55% last week, its worst performance since February. The pound hit a new two-year low after the Bank of England signaled a higher risk of recession. European traders will be watching the risks of stagflation closely in the coming weeks. The ZEW Eurozone Economic Sentiment Survey is due out on May 10. A continuation of the recent decline in sentiment would likely push the sentiment index below its March 2020 level to levels not seen since 2012. The euro stabilized against the greenback amid ECB officials hint at possibility of July rate hike.

Asia-Pacific equities were not immune to the Fed-induced shock wave. The MSCI Asia-Pacific index closed at its lowest level since August 2020. Ongoing lockdowns across China aided bearish moves, with Chinese indices recording the steepest declines in Asia. The risk-sensitive New Zealand dollar fell to its lowest level since June 2020 against the US dollar. Across Tasmania, the Australian dollar fared better, helped by the warmongering turn of the Reserve Bank of Australia. A Westpac consumer confidence report is due out this week.

China’s Politburo, a group of senior officials, has reaffirmed the country’s commitment to its “Zero-Covid” policy. This made analysts even more pessimistic about China’s 5.5% growth target. Beijing may choose to cut lending rates soon to support growth. China’s consumer price index (CPI), due May 11, is expected to cross the line at 1.9% y/y. A weaker-than-expected print would help the PBOC’s path to policy easing.


Fundamental forecasts:

Euro Weekly Fundamental Forecast: Is the ‘sell the rally’ mentality still valid?

The euro continues to lag major central banks on rate hikes, making it vulnerable in the medium term despite warnings from ECB officials

British Pound Forecast – The British Pound Has a Shocking Week

The pound fell further this week after the Bank of England (BoE) warned that UK growth could turn negative next year.

US Dollar forecast: Focus now on CPI data and an upcoming Fedspeak series

The US dollar could remain on the offensive as the Fed’s balance sheet approaches. Ahead, all eyes are on the US CPI and a slew of Fedspeak amid jittery markets.

Aussie Dollar Outlook: RBA action does little to boost AUD

The Australian dollar received an initial boost from an RBA rate hike, but the Fed overtook them and the US dollar soared. Will be AUD/USD hits new lows?

Crude oil rises as Russian oil embargo talks trump dollar rally

Brent crude extends its rally by breaking through a key technical pattern, now looking to push higher, while the EU ban on Russian oil bolsters bullish bets.

S&P 500 and FTSE 100 forecast for the week ahead – Bearish rallies crushed

Stocks crushed as bear market rallies fade. Stagflation fears weigh on the FTSE 100.

Gold Price Rebound Vulnerable to US Consumer Price Slowdown

The U.S. consumer price index (CPI) update could shake off the recent rebound in the price of gold, as inflation is expected to slow for the first time since August.

Technical forecasts:

Canadian Dollar Outlook: USD/CAD Trajectory Riskier as Key Resistance Looms

USD/CAD has rallied in recent weeks, buoyed by risk aversion sentiment and hawkish Fed expectations, but its advance may be in jeopardy as key technical resistance could block its upward trajectory.

US Dollar Technical Forecast: DXY Rallies for Week 5 – USD Levels

The US Dollar surged for a fifth consecutive week as the USD still risks resisting the bullish trend of exhaustion. The technical levels that matter on the DXY weekly chart.

Gold Technical Forecast: XAU is approaching major support. Will the bulls pounce?

Gold prices fell last week, but pared some losses on Friday. The bulls may attempt to move higher next week, but the technical picture doesn’t look ready to support a rally.

S&P 500, Nasdaq 100, Dow Jones Predictions for the week ahead

The stock market continues to look very heavy, with the overall downward bias unlikely to change any time soon.

British Pound Technical Forecast: GBP/USD, GBP/JPY, EUR/GBP

It was a brutal week for the pound as the Bank of England warned of the possibility of a “sharp economic slowdown” while warning that inflation could climb above 10% in the third quarter.

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