Gold, Nasdaq, US Dollar; Earnings, US PCE, Euro Area and US GDP

The US dollar rose slightly while global stock markets closed largely flat last week as concerns that central banks may not be done with tightening just yet outweighed. The MSCI All Country World Index was largely flat, and the US Dollar Index (DXY Index) was up 0.1%.

On the stock front, the S&P 500 ended the week down 0.1%, while the Nasdaq 100 lost 0.6%. Germany’s DAX 40 advanced 0.5% and Britain’s FTSE 100 rose 0.5%, respectively, while Japan’s Nikkei 225 rose 0.3% and the Hang Seng fell 1.8%. Meanwhile, one-year US credit default swaps — the price for insurance against a US government default over the next 12 months — have risen to the highest level since at least 2008.

Last week’s price action was largely characterized by earnings season, comments from US Federal Reserve officials, better-than-expected China data, and global inflation figures. As of April 21, 18% of S&P 500 companies reported actual results for the first quarter of 2023 year-to-date, of which 76% reported actual earnings per share estimates above estimates, while 63% of companies reported actual revenue above estimates. estimates. For the coming week, 180 companies in the S&P 500 (including 14 Dow 30 constituents) are scheduled to report first-quarter results, according to FactSet.

Year-to-date stock market performance

Source data: TradingView

A number of Fed speakers recently argued for another 25 basis point hike. Market participants priced an 83% opportunity, and many expect the Fed to start cutting interest rates by the end of 2023. US macro data was largely mixed: business activity accelerated to an 11-month high in April, But weekly jobless claims rose, indicating that the labor market may start to show signs of slowing.

Chinese GDP data beat expectations, prompting analysts to update the world’s second-largest economy for the year, which bodes well for the rest of Asia and emerging markets. UK core inflation failed to decline as expected last month, holding at 6.2% y/y, beating estimates of 6.0%, with investors now fully pricing in a 25 basis point rate hike to 4.25% on May 11.

Meanwhile, New Zealand’s inflation data for Q1 2023 surprised to the downside, raising the odds that inflation may finally have peaked, but not enough to prevent the RBNZ from going ahead with another 25 basis point hike in May. Japan’s CPI rose 3.2% year-on-year in March, in line with expectations, but still far from the Bank of Japan’s 2% target.

Year-to-date performance of the major currency pairs

Source data: TradingView

Focus on key data/policy next week: German April IFO Business Climate on Monday; US Consumer Confidence and Housing Market Data on Tuesday; Australian Q1 Inflation, German GfK Consumer Sentiment, and US Durable Goods data will be released on Wednesday; US GDP for the first quarter on Thursday; Bank of Japan interest rate decision, eurozone first-quarter GDP and US core personal consumption expenditures price index on Friday.

Perhaps the US debt ceiling will be less important next week, and more so than in June and August. The jump in the yield of 3-month US Treasury bills and default swaps in the US indicates growing uncertainty. Treasury Secretary Janet Yellen said in January that if lawmakers do not raise the nation’s borrowing limit by June, the federal government risks defaulting on its debt obligations. Democrats and Republicans appear to be at odds over a possible resolution, but the hope is that some sort of compromise will eventually be found. However, the path toward a solution could be bumpy, keeping markets on edge.

Forecasting:

The EUR has a week ahead: will heavyweight data revive a dormant EUR/USD?

EUR/USD volatility is at a two-month low with the pair stuck in a 90-point range this week. Next week’s data releases look set to challenge this range.

GBP Weekly Outlook: Is GBP/USD poised to go higher?

The British pound rally against the US dollar has stalled recently, and chances are that the consolidation will last for a while longer before it embarks on a new rally.

AUD/USD Weekly Forecast: Ominous signals for the Australian dollar

AUD/USD is looking forward to a US-dominated week while technical analysis favors more pain for the Australian dollar.

USD Weekly Outlook: Is the US Heading for Uninspiring Economic Growth?

The US dollar finally got a break this week after continuing losses. But, this may be short-lived if GDP indicates that uninspiring growth is ahead. What are the key DXY levels to watch next week?

Gold Price Forecast: XAU/USD Attempts Hints of Collapse Ahead of US GDP

The precious metal turned sharply lower at the end of the week as impressive US PMI data sent the exhausted dollar higher. Next week’s US GDP data is likely to provide direction.

S&P 500 Forecast Next Week: Bullish Momentum Fading As Bears Flirt Back

The S&P 500 and Nasdaq 100 rose slightly for the week, but the bullish momentum waned as interest rate expectations started to rise from where they were a few weeks ago.

– Text of the article by Manish Gradi, Strategist for DailyFX.com

— Individual articles written by members of the DailyFX team

Connect with Jaradi and follow her on Twitter: @JaradiManish