24.04.23 - 28.04.23
Results of the previous week
US indices have been trading mixed, mainly due to corporate earnings season. Not all companies have shown good results. At the same time, the lack of strong macroeconomic statistics from the US gives hope that the Fed might at least pause its interest rate hikes at one of its next meetings, something stock indices view favourably.
The forex market also had a mixed performance last week. EUR/USD and GBP/USD consolidated within narrow ranges. The dollar was able to strengthen against the yen. The first meeting of the Bank of Japan, chaired by the new governor, Kazuo Ueda, kept the country's monetary policy unchanged, putting pressure on the yen. As a result, USD/JPY jumped to 135.90.
Brent oil prices dropped below $80 a barrel, eventually reaching $77.49. The outlook for global demand remains a key factor affecting energy prices, and it's causing concern as markets take seriously the threat of a global economy going into recession.
Key events of the current week
US Federal Reserve rates decision
The US Federal Reserve raised the interest rate to the highest since 2006. Doing so helped slightly ease price pressures, but the Fed's representatives have expressed a readiness to continue tightening the regulator's monetary policy for as long as necessary. At the same time, the high level of the key rate is negatively affecting the economy. According to the latest data, annual GDP growth in the US was only 1.1% on the back of the highest consumer spending in almost two years, which is way below expectations (2.3%). Markets are hopeful that the US Fed may change its rhetoric at its upcoming meeting. Even the slightest hint of easing could support US stock markets. In such a scenario,the Nasdaq could rise to 13,512.60.
European Central Bank's rate decision
As in many other regions, inflation in the Eurozone is significantly higher than the target level set by the ECB. As a result, the ECB was forced to start raising rates despite an insufficiently stable economy. At the moment, the rate is at its highest since 2008, and no change in monetary policy is expected. Traditionally, a tightening of monetary policy benefits the national currency. If the ECB raises its rate at least in line with expectations, the euro could find support, and EUR/USD could aim for a move towards 1.1075.
The US. Non-farm payrolls
The US labour market has been relatively stable so far, allowing the Fed to conduct a fairly hawkish monetary policy. But the economy began to show signs of a cooldown. GDP growth has slowed more than expected, and the number of new jobs is likely to fall. If the report meets or falls below predictions, it may be yet another reason for the Fed to put its monetary policy tightening on hold. While such a move is unlikely to support the dollar, metals could see positive movement in this scenario.XAU/USD may move toward 2,045.00.