Markets Week Ahead: Gold, Dow, Pound-Dollar, BoE Rate Decision, Fed Risk, PMIs

Dollar, Money, Cash Money, Business, Currency, Finances

Markets were roiled by a wave of volatility last week largely in response to the Fed bringing forward its interest rate hike projections. Federal Reserve officials penciled in two rate hikes by the end of 2023, which was considerably more hawkish than expected. Not to mention, Fed Chair Powell retired the “not talking about talking about tapering” phrase, noting that this was the “talking about talking about” meeting.

These two developments helped fuel a massive influx of US Dollar strength across the board of major currency pairsUSD/JPY and USD/CAD surged while EUR/USDGBP/USD, and AUD/USD snapped sharply lower. As such, we saw the biggest one-week rally by the broader DXY Index since March 2020. Precious metals plunged sharply due to the increased threat of an expedited Fed taper timeline with gold price action tumbling -5.88% to trade back in the red year-to-date.

MAJOR CURRENCIES AND GOLD PERFORMANCE AGAINST US DOLLAR

US Dollar Weekly Performance Chart vs Gold and Major Currencies

Speculative risk appetite also deteriorated notably judging by the drop-off in demand for major cryptocurrencies like Bitcoin and Ethereum. Since the latest Fed announcement, BTC/USD price action has fallen -15.55% while ETH/USD has declined -17.34%. As for major stock indices, the S&P 500 Index notched its worst week of losses since 22 February after falling -1.91% on balance.

The Dow Jones faced similar selling pressure and lagged with an -3.45% decline. The Nasdaq was able to finish in positive territory on the week with a gain of 0.37%. Beyond the US stock market, the DAXFTSE 100, and EU STOXX 50 slid -1.56%, -1.63%, and -1.05% respectively. The ASX 200 outperformed thanks to its 2.67% advance.

Looking to the week ahead on the DailyFX Economic Calendar, we see that the release of monthly PMI data is scheduled for release. Markets are also scheduled to receive another reading on US inflation. The Fed’s preferred gauge of inflation, core PCE, is due to cross wires on Friday, 25 June at 12:30 GMT. These high-impact data releases stand to weigh on broader market sentiment due to their potential to further sway the threat of Fed tapering.

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