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The US national debt has reached its ceiling. What comes next? [Weekly Digest]

Tue, 01/24/2023 - 11:00

16.01.23 - 20.01.22

Results of the previous week

COIN +10.10%

BRN +3.99%

HG +3.19%

NG -15.37%

YM -2.54%

XAGUSD -1.19%

US indices came under pressure amid released earnings reports and mixed macroeconomic statistics. The skyrocketing US national debt doesn't add any positive sentiment either. Altogether, this means that the country is on the verge of default. According to the US Treasury, default can be avoided until the summer. But the situation will become critical unless the limit is raised by then or another solution is found.                                     

The Forex market was similarly mixed. The pound managed to strengthen against the US dollar. The USD/JPY pair also consolidated around previously achieved levels. On the other hand, commodity currencies suffered losses against their US counterpart. This is partly due to sentiment around the US Federal Reserve's monetary policy. The regulator isn't ready yet to give up on interest rate hikes.                

Brent crude oil prices are consolidating around the resistance level at $87.00 but haven't overcome it yet. A key supportive factor is optimistic investor sentiment about demand for oil in China. Refiners in the People's Republic are increasing their oil purchases in hopes of an upcoming energy consumption boost due to recently lifted COVID restrictions.


Key events of the current week

Germany. Manufacturing PMI
EURUSD

DATE
24.01

GMT
08:30

FORECAST
48.1

PREV.
47.1

IMPORTANCE
Medium

The economic situation in Germany remains rather complex. Energy prices continue to soar, which is harming some sectors, even though energy shortages aren't an urgent issue at this stage. Meanwhile, business activity in the country's industrial sector remains in decline (PMI below 50), which is a negative signal. However, a slight increase is predicted compared to the previous period. If the report meets expectations, the euro could receive short-term support. Against this backdrop, the EUR/USD could try to overcome the resistance level at 1.0850 and continue towards 1.0900.

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Germany. IFO Business Climate Index
FDAX

DATE
25.01

GMT
09:00

FORECAST
89.9

PREV.
88.6

IMPORTANCE
High

Germany's economy is slowly recovering from the shock of changing raw material logistics and is also gradually adapting to sharply rising energy costs. A slight increase is expected in the Business Climate Index, which reflects entrepreneurs' current assessment of economic conditions and their expectations for the coming six months. The positive sentiment may serve as a good signal for the German DAX (FDAX). If the report meets forecasts, the index could try to recover to around 15,340.

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The US. GDP growth rates
USDJPY

DATE
26.01

GMT
13:30

FORECAST
2,7%

PREV.
3,2%

IMPORTANCE
High

The US economy is showing relative stability despite the fact the Federal Reserve has already raised interest rates several times, taking the key rate to the highest level in 15 years. It's worth noting, however, that US debt has reached its ceiling once again, and the Department of Treasury has already started to take unprecedented measures to avoid a default. This raises some concerns, and a slowdown in the US economy could put pressure on US indices. In such a scenario, the Nasdaq (NQ) may continue its downtrend to 10,980.

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