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Weekly Digest

Chances of a smaller rate hike by the US Fed have risen [Weekly Digest]

Tue, 01/17/2023 - 08:28

09.01.23 - 13.01.22

Results of the previous week

BRN +5.68%

TF +4.86%

XAUUSD +2.23%

VIX -11.89%

NG -6.9%

USDJPY -2.34%

The slowdown in price pressure growth to 6.5% in annualised terms, together with relatively dovish comments from US Fed officials, boosted markets' hopes that the regulator will raise the key Fed Funds rate by just 0.25% at its next meetings. US stock indices reacted optimistically to this news and were up for most of the week.                                     

But what's good for stock indices isn't so good for the US dollar. As a result, the greenback was under pressure for most of the week. EUR/USD has risen to its April 2022 highs, while USD/JPY decreased to its July 2022 lows.                

Brent oil prices have moved to around $85 a barrel. The main driver of support is the removal of most of China's COVID restrictions, which could spur energy demand. The People's Republic is one of the world's biggest oil consumers and importers. 


Key events of the current week

Germany. ZEW Indicator of Economic Sentiment
EURUSD

DATE
17.01

GMT
10:00

FORECAST
-16

PREV.
-23.3

IMPORTANCE
High

Germany's economy remains vulnerable to high energy prices. The situation is somewhat mitigated by warm weather, which has led to a slight reduction in gas prices. However, this phenomenon is seasonal. Over the last three months, the ZEW Indicator of Economic Sentiment has been very slow to move out of the deep depression zone, rising from -61.9 to -23.3. But the forecasts aren't very encouraging. The indicator is expected to rise compared to the previous period, which could still see the euro come under some short-term pressure. The EUR/USD currency pair could slide to somewhere around 1.0670.

Trade EUR/USD

The UK. Inflation rate
GBPUSD

DATE
18.01

GMT
07:00

FORECAST
10.5%

PREV.
10.7%

IMPORTANCE
High

The UK has been affected by high energy prices, resulting in a rise in costs for most goods and services that has increased the burden on households. Despite the Bank of England having already increased its interest rate to 3.5%, the highest level since November 2008, it has yet to bring price pressure under control. The country's inflation rate is forecast to reach a new high of 11.5% (compared to 11.1% in October). This may lead to the Bank of England potentially tightening its monetary policy, and the pound could receive short-term support. In such a scenario the GBP/USD pair could move back to 1.2420.

Trade GBP/USD

US. Retail sales
USDJPY

DATE
18.01

GMT
13:30

FORECAST
-0.4%

PREV.
-0.6%

IMPORTANCE
High

Retail sales are a key indicator of the US economy's health. December's data may be a disappointment since this is traditionally a month when pre-holiday shopping increases. This time, however, the figure is expected to reflect a decline in consumer activity. This is a rather alarming signal because the rather dovish tone from US Fed officials' recent statements would lead one to expect the dollar to come under pressure amid weak figures. In this case, USD/JPY could continue to move toward 126.80.

Trade USD/JPY

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