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Global market sentiment has improved on stock exchanges around the world over the past week. On Wall Street, the S&P 500 and Nasdaq 100 gained +2.67% and 4.82%, respectively. In Europe, the FTSE 100 and DAX 40 rose 1.88% and 3.26% respectively. In the Asia-Pacific region, the Nikkei 225 and Hang Seng Index rose 1.16% and 3.56%, respectively.
US inflation slowed further in December, coming in at 6.5% yoy versus 7.1% in November. However, this was in line with expectations. As the energy component continued to weaken, The cost of food and shelter remained high. Nonetheless, markets took this as further evidence that the Federal Reserve is about to stall its rate-hiking cycle.
Government bond yields declined, but the pace has slowed significantly compared to the past few weeks. Meanwhile, the US dollar continued to weaken. The DXY Dollar Index closed at its lowest level since June 2022. The top-performing major currencies were the Japanese Yen, the Euro and the Australian Dollar. Gold prices rose 2.93% in their best week since April 2022 as bond yields and the USD fell.
Next week, for once, the Bank of Japan could be an interesting event for USD/JPY. That’s because there has been since the central bank unexpectedly adjusted monetary policy in December rising speculation that further changes towards normalization could be imminent. Japan will also release the inflation gauge for December later in the week.
For USD/CAD and GBP/USD, Canada and the UK will also release CPI numbers. Meanwhile, the Australian dollar will pay close attention to Chinese GDP and another set of local employment data. The reporting season is also gradually picking up speed. What else awaits the markets in the coming week?
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How the markets have performed – week of 1.9
Fundamental predictions:
US Stock Forecast: S&P 500 on pause as major banks hoard cash for a bumpy 2023
Earnings for major US banks are proving broadly resilient, but warnings of potential credit pressures send the S&P 500 down on Friday as banks stockpile cash reserves.
British Pound Fundamental View: GBP/USD turns to UK CPI after US inflation
The British pound strengthened against the US dollar last week as softening US inflation data reinforced less hawkish monetary policy bets from the Federal Reserve. GBP/USD next becomes the UK CPI.
Australian Dollar Outlook: Blow higher on soft US Dollar
The Australian dollar rose on renewed optimism over China’s reopening and the US dollar’s market pounding contradicts the Fed’s words. Will AUD/USD move higher?
Dollar pushes to 7-month lows but declines in forecasts a cooldown, VIX link important
The broader measure of the US dollar — the DXY index — fell last week to its lowest level since early June. The reversal appears productive as the 2022 surge offers plenty of premium to burn, but fundamental support for this move is less reliable than the bears may be recognizing.
Euro Fundamentals – EUR/USD could struggle in the near term
The recent sell-off in the US dollar is clearly reflected in a reborn EUR/USD, which continues to trend higher. Sterner tests for bulls coming up.
Technical forecasts:
US Dollar Technical Outlook: Foil showing signs of fatigue?
The US dollar’s broader slide remains intact, but the slide could slow or even halt as it nears key support areas in a number of currencies. What are the prospects and key levels to watch for some of the major currency pairs?
Gold, Silver Price Prediction: Gold Breakout, Silver Resistance Test
Gold has had a massive strength move this week, but silver is struggling at the same point of resistance that has been holding the highs for a month now.
BTC/USD Outlook: Bitcoin Bulls Rebound After Double Digit Gain
Bitcoin prices have surged above key technical resistance fueled by USD weakness and a move above previous resistance at $17792. Can BTC/USD Retest 2017 Highs and Break $20,000?
S&P 500, Nasdaq, Dow Jones Technical forecast for the coming week
Stocks reacted strongly bullish after CPI data, and the S&P 500 is threatening a breakout of the 2022 bearish trendline that has held the highs for most of the last year.
— Body of the article Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com
— Individual articles written by DailyFX team members
To contact Daniel, follow him on Twitter:@ddubrovskyFX
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