The US dollar registered modest gains over the euro as data released over the last week revealed cooling in inflation and subdued consumer spending.
Forex
Source: Bloomberg.
The US dollar arrested its slide against the euro, registering modest gains last week as reports showed cooling inflation and a fall in consumer spending. The EUR/USD pair closed the week at 1.0869 USD. Consumer spending was down 0.2% in December, while the Personal Consumer Expenditure (PCE) index rose 0.1% in November, according to the data released by the Commerce Department.
The GBP/USD pair was down for the week as the British pound sterling slipped 0.12% over the week to end at 1.2397 USD over fears of policy tightening measures by the Bank of England (BoE).
This week, attention will be on a slew of central bank policy decisions with the US Federal Reserve, the European Central Bank (ECB), and the BoE slated to make policy rate decisions. It is widely expected that the US Fed will go with a quarter basis point rate hike as it attempts to battle inflation in a tough economic environment. The Fed’s interest rate decision will be announced on Wednesday, 1 February, while those of the ECB and the BoE are scheduled for a Thursday, 2 February, announcement.
Meanwhile, consumer confidence data will be released on Tuesday, 31 January. The Institute of Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) data is slated for a Wednesday, 1 February, release. Meanwhile, the non-farm payrolls (NFP) data, unemployment rate and non-manufacturing Purchasing Managers Index (PMI) are due to be released on Friday, 3 February.
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Commodities
Source: Bloomberg.
Gold prices rose for a sixth straight week to end last week at 1,928.10 USD an ounce. Its gains were capped by a strong dollar and a rise in US treasury bond yields.
The yellow metal’s price movement in the coming weeks will be dictated by the policy rate decisions by the various central banks in action this week, as well as the January employment numbers and the Purchasing Managers’ Index data in the US.
Meanwhile, oil prices started the week strongly before hitting the brakes as the week came to a close. Prices of the commodity were curtailed by better-than-expected US economic growth data and hopes of increasing demands from China as Covid fears have subsided over the last few weeks. Furthermore, the oil markets came under pressure due to strong Russian supply despite an EU ban and the Group of 7’s — commonly known as G7 — price cap that was imposed on the country over its war with Ukraine.
Ministers of the OPEC+ grouping — which comprise the Organization of the Petroleum Exporting Countries, or OPEC, and its allies led by Russia — are scheduled to gather on Wednesday, 1 February. Their decisions will drive the fate of oil prices in the coming weeks.
Cryptocurrencies
Source: Bloomberg.
With four consecutive weeks of gains registered by major cryptocurrencies, the winter for digital assets — which followed the November 2022 collapse of the cryptocurrency exchange platform Futures Exchange (commonly known as FTX) — seems to be over. The global cryptocurrency market capitalisation stood above the 1 trillion USD mark for a seventh consecutive day on Sunday, 29 January, making this the longest streak since August 2022.
Bitcoin, the world’s largest cryptocurrency by market capitalisation, was trading at 23,783.90 USD at the time of writing. Meanwhile, Ethereum — the second-most popular digital asset — was trading at 1,648.33 USD as of Sunday, January 29.
The decisions at the US Federal Open Market Committee (FOMC) meeting on Wednesday, 1 February, can cause a significant shift in price levels of major cryptocurrencies, which could lead to volatility in the market.
In a development that could lead to regulation in the cryptocurrency space, thereby likely tempering the large-scale volatility seen in the digital assets, the White House published a blog titled “The Administration’s Roadmap to Mitigate Cryptocurrencies Risks” last Friday, January 27. It calls for the US Congress and other authorities to step up their efforts to regulate the cryptocurrency industry in the United States.
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US stocks
| Name of the index | Friday’s close | *Net change | *Net change (%) |
| Dow Jones Industrial Avg (Wall Street 30) | 33,978.08 | 602.59 | 1.81% |
| Nasdaq (US Tech 100) | 12,166.60 | 547.57 | 4.71% |
| S&P 500 (US 500) | 4,070.56 | 97.95 | 2.47% |
*Net change and net change (%) are based on the weekly closing price change from Friday to Friday.
Nasdaq registered its fourth straight week of growth, rising 4.71% over the week. The index remains on course to register its strongest monthly performance since July 2022. Meanwhile, Dow Jones and S&P 500 overcame their downturn to end the last week with a 1.81% and 2.47% rise, respectively. Their performance was in line with the favourable PCE data and cooling in inflation.
With 143 of the S&P 500 companies having reported their fourth-quarter earnings results, 67.8% of the firms have outperformed Wall Street expectations, which is below the 76% rate seen over the last four quarters.
US Federal Reserve Chairman Jerome Powel has indicated a continuing battle against inflation. As a result, the markets are anticipating another rate hike, albeit limited to 25 basis points this week.
Along with the Fed meeting and January employment data, a number of high profile earnings reports will be released next week, including those from Apple, Amazon, Google-parent Alphabet, and Facebook-parent Meta Platforms.
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