Risk-aversion was prevalent this week, in a backdrop of aggressive expectations around monetary tightening, high US treasury yields, inflation fears, geopolitical tensions, oil disruptions and earnings disappointments.
Inflation was in the spotlight, with CPI figures from the UK standing out. Headline CPI jumped to 30-year highs in December (+5.4% y/y), reinforcing the case for another rate hike by the Bank of England.
Eurozone's and Germany's Consumer Price Indexes did not offer surprises (+5% y/y and 5.3% y/y respectively, but Germany's Producer Price Index surged 24.2% y/y in December, compared to +19.2% in November.
Australia released another solid Jobs Report, as Unemployment dropped to 4.2% last month, versus 4.6% prior. The economy also added 64.8K new jobs, which is no match to November's +366.1 print, but it was better than expected.
The week had opened with mixed economic releases from China, as Q4 GDP rose 1.6% q/q, but Retail Sales rose just 1.7% y/y in December - a significant slowdown from last month's +3.9%.
The People's Bank of China (PBOC) goes against the path of its Western counterparts, as it cut a series of key rates during this week.
Bank of Japan maintained interest rates and asset purchases unchanged, but upgraded its forecasts for Inflation, although it still does not see 2% being reached in the forecasted period (fiscal 2023). It now projects y/y median CPI of +1.1% compared to 0.9% in the October projections.
We also had a couple of oil disruptions this week, due to drone strikes in major producer United Arab Emirates and explosion in Iraq-Turkey pipeline
The US Dollar was heading towards gains against its major counterparts, although USD/JPY was down due to risk-off flows towards the Japanese Yen.
US indices took a beating and along with the disappointment from Netflix, NAS100 was registering a more than 5% weekly drop at the time of writing.
USOIL rose to its highest level since 2014 on Tuesday, but then erased its gains and XAU/USD looked set for its second straight profitable week.
Netflix collapsed on Friday's open due to disappointing subscriber growth guidance, despite overall solid Q4 results. There were more news though, such as Microsoft's massive offer to buy Activision Blizzard, Deliveroo's Q4 growth and more. Read more here.
Week Ahead (GMT)
The Federal Reserve monetary policy decision (Wednesday) dominates next week's calendar, in a backdrop of aggressive tightening expectations from the markets.
The Bank of Canada (BoC) hands down its monetary policy decision earlier on the same day, having concluded its asset purchase program from October.
On the data front, we expect a series of preliminary PMIs on Monday, while inflation remains in the spotlight with CPI readings from Australia (Tuesday), New Zealand (Wednesday) and PCE figures from the United Sates (Friday).
The earnings season picks up speed, with the likes of Tesla, Microsoft, Intel, Apple, Boeing and others releasing their quarterly results.
See the economic calendar here.
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.