Weekly Analysis 9 Jan – 13 Jan 2023

Week 9 Jan – 13 Jan 2023

 Monday 9 Jan

Holiday

JPY

 Respect for the Aged Day

05:00

EUR

 Unemployment Rate

08:30

CAD

 Building Permits

 Tuesday 10 Jan

14:00

USD

 Fed Chair Powell Speaks

17:00

USD

 US EIA ST Energy Outlook

 Wednesday 11 Jan

15:30

USD

 US Crude Oil Inventories

 Thursday 12 Jan

13:30

USD

 US Core CPI

13:30

USD

 US CPI

13:30

USD

 US Initial Jobless Claims

 Friday 13 Jan

07:00

GBP

 UK GDP

07:00

GBP

 UK Manufacturing Production

The Consumer Price Index (CPI) for December will be released on Thursday and is expected to impact predictions on whether the Federal Reserve will increase interest rates by 0.25% or 0.50% in the beginning of the following month. According to Bloomberg data, economists expect the CPI to have increased 6.6% from the previous year in December, a decrease from the 7.1% increase seen in November.

The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all saw increases of around 1.5% for the week, with the Nasdaq rising 1%.

The United Kingdom will release its Gross Domestic Product (GDP) figures for November on Friday. These figures will be released against a backdrop of a significant cost-of-living increase, with double-digit levels of inflation, strikes in the transport and public sectors, and a weakening housing market. The country is expected to be facing a prolonged recession.

There was a generally positive outlook on risk in the first week of the year, with stock markets ending on a high note due to slowing wage growth in the US and a faster decline in Eurozone inflation. If the positive risk sentiment persists, it could put pressure on the dollar. The Japanese yen was the weakest performer of the week, followed by the euro and then the dollar. The Australian dollar was the strongest due to an improvement in risk sentiment and rumors of China easing trade restrictions. The Canadian dollar was the second strongest due to strong job data. Other currencies had mixed results.

On the Gold side, to understand the full story, it would be necessary to examine Treasury yields. The 10-year rate saw the biggest drop since February 2022. The decrease in bond yields contributed to a significant increase in the price of gold, which rose 2.38%, the largest increase since late November.

Investors are focusing on slowing average hourly earnings and disappointing US ISM services data, which has reduced predictions of a hawkish Federal Reserve policy in the long term. At the same time, increasing confidence in China's economy has led to an appreciation of the yuan and the Hang Seng Index reaching its highest level since July 2021. Mild weather in Europe has caused a drop in crude oil prices. In the coming week, market attention will be on the closely watched US inflation report on Thursday, which is expected to show softer average hourly earnings and a further decrease in the Consumer Price Index (CPI). Additionally, investors of the British pound will be anticipating the release of the UK's GDP figures.