Overall global market sentiment ended on an upbeat this past week. On Wall Street, the Dow Jones, S&P 500 and tech-heavy Nasdaq Composite closed +0.88%, +0.75% and +0.63% respectively. In Europe, the DAX 30 wrapped up +1.11%. Sentiment was mixed in the APAC region, with the Nikkei 225 finishing -0.71% as the ASX 200 closed +1.61%.
A mixed US non-farm payrolls report on Friday sent Treasury yields lower as the markets trimmed Fed tapering expectations. That pressured the US Dollar. Currencies like the Australian Dollar and Japanese Yen outperformed the Greenback. The latter managed to hold some ground against the Euro and British Pound. Anti-fiat gold prices weakened while crude oil continued pushing higher.
In the week ahead, the Canadian Dollar and Euro are eyeing the Bank of Canada and European Central Bank respectively. The BoC has been one of the early movers amongst developed central banks to taper asset purchases. This could leave the Loonie on the offensive if the central bank continues to outline its plans to do more of the same in the near term.
In contrast to the BoC, the ECB may keep its tone to maintain ultra-loose policy, with emergency asset purchases to continue at around EUR85 billion during the third quarter. This may leave the Euro vulnerable. The US CPI report on Thursday will also be closely watched as core inflation is expected to clock in at its fastest since early 1993.
That may keep the debate open to how soon the Fed could start tapering its asset purchases. This may be a downside risk for general market sentiment, with gold vulnerable if there is a pickup in Treasury rates. Crude oil prices are eyeing the monthly OPEC report. What else is in store for financial markets in the week ahead?
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD
The Nasdaq 100 index limped into the weekend in a sour mood, as robust jobs reports reignited fears about Fed tapering stimulus. The tech sector may be under further pressure if this narrative strengthens.
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USD awaits US CPI and ECB, while rise in demise of dollar reporting may prompt contrarian signal.
For Euro traders the week ahead will be dominated by the ECB meeting that ends Thursday but any hopes for clarity on when the Eurozone central bank will start tightening monetary policy will likely be dashed.
The Bank of Canada (BoC) rate decision is likely to influence the near-term outlook for USD/CAD as the central bank starts to scale back its emergency measures.
Gold prices were slightly scarred this past week, leaving XAU/USD at risk to a beat in US inflation data next. However, follow-through may have to wait until the Fed rate decision.
The risk-sensitive Australian Dollar was a winner following Friday’s US non-farm payrolls miss. Australian Westpac consumer confidence and US CPI are in focus next week as traders weigh central bank policy outlooks.
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U.S. stocks appear poised to trade higher, but should weakness set in there is substantial support below.
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GBP/USD set a fresh three-year-high but promptly pulled back to continue in the range that’s been in-play over the past few weeks.