At the start of last week, the US stock market attempted to recover from the sell-off, but the S&P 500 and Nasdaq came under pressure again. Corporate earnings were the main catalyst for the decline, fuelling doubts over the returns on large-scale investment in artificial intelligence. The market also reacted negatively to rising oil prices, which heighten inflation risks and the likelihood that central banks will keep interest rates high.
The foreign exchange market saw mixed movements. The dollar weakened against sterling following UK macroeconomic data showing lower unemployment but higher inflation, limiting the Bank of England’s scope to ease monetary policy. Meanwhile, rising oil prices and stronger inflation expectations pushed up US government bond yields, contributing to a correction in gold prices.
Brent crude reached $114.72 a barrel. Energy prices continue to be supported by geopolitical tensions in the Middle East. Reports of diesel fuel supplies prompted short-term profit-taking and a downward correction.
US. Durable Goods Orders
Analysts forecast an increase in US durable goods orders. This is a positive signal, as rising orders point to faster production growth and industrial investment. Stronger key macroeconomic indicators could prompt the Fed to revise its monetary policy outlook. Economic stabilisation could allow the US regulator to take more decisive action to tackle inflation. That's good news for the US dollar. Under these conditions, USD/JPY could rise to 158.50.
US Federal Reserve rate decision
Inflationary pressures in the US remain elevated: consumer prices rose by 3.7% year-on-year, above the Fed's target. The market expects the regulator to keep its key interest rate unchanged. In this context, the regulator's rhetoric and subsequent statements will be key. Maintaining a tight monetary policy stance could support the US dollar. Against this backdrop, XAU/USD could correct towards 3,950.00.
The ECB's monetary policy decision
Inflationary pressures persist in the eurozone, driven by external factors including conditions in Middle Eastern energy markets. However, core inflation trends lead analysts to expect the ECB to keep its key interest rate unchanged. The Fed's hawkish monetary policy stance, against the backdrop of more dovish ECB rhetoric, could widen the interest rate gap and add pressure to the euro. Under these conditions, EUR/USD could fall to 1.1100.