US stock indices posted mixed performances last week amid a lack of strong new catalysts. Expectations for US Federal Reserve interest rates and rising Treasury yields, driven by economic resilience and persistent inflation risks, acted as a constraint. Technology stocks linked to artificial intelligence continued to support the market.
In the foreign exchange market, the US dollar continued to strengthen against most major currencies. The dollar was supported by expectations of another possible increase in the policy rate and a further rise in Treasury yields. At the same time, individual currencies faced localised pressures: the yen weakened amid uncertainty over the pace of monetary-policy tightening by the Bank of Japan, while the euro declined on concerns about France’s fiscal position.
Brent crude prices remained highly volatile. Geopolitical tensions in the Middle East continued to support energy prices. However, towards the end of the week, reports that European countries could release strategic oil and diesel reserves to address local shortages temporarily pushed Brent below $100 a barrel.
United States: Services PMI
The US services sector remains resilient, with the business activity index continuing to hold in expansion territory (above 50 points). This is an important indicator, as services account for around 75% of the country’s GDP. Nevertheless, analysts allow for some moderation in the indicator compared with the previous period. Against a backdrop of persistent inflationary pressures, this is unlikely to signal an easing of the Fed’s monetary policy. In the short term, a weaker reading could weigh on the US currency, with USD/JPY potentially testing the 156.00 level.
Germany: Industrial Production
Germany’s industry-oriented economy remains highly sensitive to energy costs. Earlier, rising energy prices amid the escalating conflict in the Middle East led to a decline in output. However, analysts expect a gradual recovery in the indicator during the reporting period. As Germany has the eurozone’s largest economy, positive data could support the single currency, creating scope for EUR/USD to move towards 1.1350.
US Federal Reserve Meeting Minutes
Following its latest meeting, the US Federal Reserve raised its policy rate to contain inflation. Federal Reserve officials and market participants do not rule out a further tightening of monetary policy by the end of this year, as high energy prices feed through into the cost of goods and services. Inflation risks remain the determining factor in interest-rate decisions. The Federal Reserve’s continued hawkish rhetoric supports the dollar but puts pressure on gold prices. Under these conditions, XAU/USD could undergo a correction towards the 4,100.00 level.