02.01.23 - 06.01.22
Results of the previous week
US indices performed mixed in anticipation of the release of US labour market data. It should be noted that the numbers cheered markets, giving hope that the US Federal Reserve won't raise interest rates as aggressively as before. One aspect of the report allowed traders to make these assumptions: wage growth was lower than expected. Overall, the labour market situation is stable, and the economy is creating new jobs while unemployment is falling..
At the beginning of the week, the dollar tried to show its strength, but the release of labour market data changed sentiment around the greenback. On Friday, it lost ground to the euro and pound sterling, which were able to recover practically all of the losses they saw in the first four business days of the new year.
Prices on Brent crude oil spent most of the week under pressure, with its price moving to below the $77.60 mark at the moment. Concerns regarding demand for oil remain a key factor for price pressure on the energy resource. The chances of an economic slowdown and the COVID-19 situation in China risk driving demand downward. What's more, the warm weather in the United States and Europe is weakening concerns about a lack of fuel.
Key events of the current week
The US. US Federal Reserve Chairman Jerome Powell's speech
The latest US labour market data show the US economy is in a relatively stable position. What's more, the regulator has more or less succeeded at slowing inflation. On top of that, the rate of hourly wage growth in December slowed compared to November. As such, there is reason to believe that one factor propping up inflation is disappearing. With these developments in place, markets expect the US Federal Reserve chief to hint that the regulator will begin to slow the rate of interest rate hikes. Less aggressive comments from the Fed head could support indices. In such a scenario, The S&P 500 could return to around 4030.00.
The US. Inflation rate
The Fed's actions have led to the desired result. Inflation is slowing down. Of course, the indicator is still much higher than the regulator's target rate, but price pressure has receded from record highs. In this environment, markets expect the Fed to at least slow the past of its interest rate hikes. More proof of lower inflation will be able to increase market confidence that this course of action will take place. As such, if inflation drops again, it could disappoint the dollar, which would buoy its main competitors. In such a scenario,GBP/USD could return to the 1.2290 mark.
Germany. GDP growth rates
The German economy is the biggest in the entire euro area, and the direction its macroeconomic indicators go in significantly affects the monetary bloc's economy. Recently, rising energy prices have negatively affected key economic indicators since some of the largest companies have either reduced production or stopped it entirely. Naturally, the market has already factored in the country's slowdown in GDP growth. However, if the report meets or falls short of expectations, the euro could come under pressure. In such a scenario, the EUR/USD pair could roll back to the 1.0580 mark.