Weekly Market Recap: January 03-07 2022

Key Developments

The first week of the year was off to a somewhat slow start, as some markets were still on holiday, but activity picked up quickly.

Minutes from the Fed's December meeting were released on Wednesday, spooking stock-markets and the tech sector in particular, with their hawkishness.

Of note, was the fact that "Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate." [1]

A day later, the president of the St. Louis branch, pressed on, commenting that "The FOMC could begin increasing the policy rate as early as the March meeting in order to be in a better position to control inflation". [2]

On Friday, focus shifted on US Jobs Report which showed the disappointing addition of 199K payrolls in December. However, the Unemployment Rate dropped to 3.9% and the Participation Rate picked up to 61.9%.

Canada added 54.7K jobs last month, following November's blowout +153.7K print, while Unemployment declined to 5.9%.

Eurozone CPI Inflation surged 5% y/y in December, as preliminary data showed earlier today.

OPEC+ reconfirmed its production adjustment plan on Tuesday, agreeing to add another 400,000 barrels per day in February.

The omicron variant continued to spread rapidly, with WHO Director General De Tedros warning that "While Omicron does appear to be less severe compared to Delta, especially in those vaccinated, it does not mean it should be categorized as 'mild'. Just like previous variants; Omicron is hospitalizing people and it is killing people." [3]

Market Movements

The US Dollar got off to a great start to the year, boosted by the Fed's hawkish minutes and aggressive rate hike expectations by the markets. The greenback's rise versus the Japanese Yen stood out, as the pair hit five-year highs.

The Fed's narrative sent Wall Street lower, despite the solid start to the week, while over in Europe, the GER30 was trying for a profitable close.

The USOil was en route for its best week since August at the time of writing, helped by production issues and Kazakhstan unrest. XAU/USD was looking set to halt its three-week profitable streak, surrendering to the US Dollar's strength.

Corporate Activity

Automakers, such as Ford and Stellantis, were in the spotlight this week, while Sony announced its intention to enter the Electric Vehicle (EV) market. Read more here.

Week Ahead (GMT)

During the second week of the year, the US Earnings season gets underway. Some of the companies that stand out are Delta Airlines (DAL.us) on Thursday, followed JP Morgan (JPM.us) and Citigroup (C.us) on Friday.

On the data front, CPI Inflation figures from China and the US will draw attention on Wednesday, whereas on Friday, the spotlight will fall on UK Industrial Production and US Retail Sales.

See the economic calendar here.

Nikos Tzabouras

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.

References

1

Retrieved 07 Jan 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20211215.pdf

2

Retrieved 07 Jan 2022 https://www.stlouisfed.org/news-releases/2022/01/06/bullard-discusses-initial-response-inflation-shock

3

Retrieved 27 Jan 2022 https://mobile.twitter.com/WHO/status/1479167003109859328

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