Forex Market Analysis: U.S Inflation Development and Other Key Market Insights

April 15, 2024

CURRENCIES

Overview of Market Trends: In the past week, gold prices spiked, the U.S. dollar soared, and the EUR/USD and GBP/USD pairs slumped.

U.S. Inflation Developments: U.S. inflation rates have risen, leading to a reduction in expectations for interest rate cuts. Originally anticipated rate cuts are now expected no earlier than the third quarter.

U.S. Dollar and Treasury Yields: The reassessment of U.S. interest rates has resulted in a sharp increase in the U.S. dollar and multi-month highs in U.S. Treasury yields.

Gold and Silver Prices: Despite high U.S. interest rates, gold reached new all-time highs before experiencing a significant drop. Silver also displayed high volatility, peaking before falling by the end of the week.

Currency Pairs Analysis: Renewed strength in the U.S. dollar has pushed the EUR/USD and GBP/USD to five-month lows.

Key Economic Events Next Week: Important upcoming events include U.S. retail sales, UK inflation and labor data, and economic sentiment indicators from Germany and the Euro Area.

Special Mention – Apple: Apple’s stock rose sharply after announcing an update to its MacBook line with the new M3 chip, approaching a key resistance level.

STOCK MARKET:

Key Market Insights for the Week:

• Anticipation of more bank earnings including those from Bank of America, Goldman Sachs, and Morgan Stanley.
• Netflix and United Airlines will also present their quarterly reports.
• A focus on retail sales with the March update scheduled for release on Monday.

Economic Climate Overview:

• Increased market anxiety due to persistent inflation may delay Federal Reserve rate cuts.
• Economists are now predicting the Fed to hold interest rates steady until at least fall 2024, with a potential rate cut possibly delayed until December.

Bank Earnings Reports:

• Recent earnings from JPMorgan Chase, Wells Fargo, and Citigroup showed a dip in net interest income, underwhelming market expectations.
• Upcoming earnings from additional major banks will provide further insights into the impact of higher interest rates on the financial sector.

Consumer Spending Trends:

• Despite previous declines, retail sales are expected to have risen by 0.4% in March, following a rebound in February.
• Continued strong wage growth suggests consumer spending might remain robust.

Market Strategy and Expectations:

• Financial markets and strategists are closely monitoring company earnings for signs of demand resurgence and revenue growth, which are critical for sustaining the market rally.
• Earnings performance this season is deemed “critical” for market optimism, amidst a backdrop of cautious economic forecasting.

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