CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Markets week ahead: Dow Jones, US dollar, gold, euro, Fed, CPI, China

The market is coming off an event-packed week that included the Federal Reserve’s May interest rate decision and the US jobs report. Global equity markets fell after the US central bank rattled investors as it ramped up its fight against inflation. The Nasdaq-100 Index (NDX) fell 0.99%, and the Dow Jones Industrial Average trimmed 0.24%. Treasury securities came under heavy selling following the FOMC, driving rates higher. Bitcoin prices tumbled, reflecting the sharp evaporation in sentiment for risk assets.

Market-based bets on the Fed’s rate-hiking course were largely unchanged after Friday’s NFP. The April consumer price index is expected to drop at 8.1% y/y on Wednesday. That would be down from 8.5% in March. A weaker-than-expected print may help to ease some inflationary concerns. Regardless, it is likely to inject some volatility into the Treasury markets, and it may sway Fed rate hike bets. Short-term breakeven rates fell through the week, reflecting easing concerns over rising prices amid aggressive central bank action. That hurt gold prices.

The risk-off sentiment spilled over into the European markets that are already struggling with a dampened backdrop from the Ukraine conflict. The Stoxx 600 Index dropped 4.55% last week, its worst performance since February. The British pound tanked to a fresh two-year low after the Bank of England signaled a higher risk of recession. European traders will be closely monitoring the stagflation risks in the coming weeks. The ZEW Eurozone economic sentiment survey is due out on May 10. A continuation of the recent drop in sentiment would likely push the sentiment index below its March 2020 to levels not seen since 2012. The euro steadied against the Greenback amid ECB officials talking up the chance for a July rate hike.

Asia-Pacific stocks weren’t immune from the Fed-induced shockwave. The MSCI Asia-Pacific Index closed at its lowest level since August 2020. The ongoing lockdowns across China aided the bearish moves, with Chinese indexes seeing the sharpest declines across Asia. The risk-sensitive New Zealand dollar fell to the lowest level since June 2020 versus the US dollar. Across the Tasman, the Australian dollar fared better, aided by the Reserve Bank of Australia’s hawkish shift. A consumer confidence report from Westpac is due out this week.

China’s Politburo, a group of high-ranking officials, reaffirmed the country’s commitment to its “Zero-Covid” policy. This caused analysts to grow even more pessimistic about China’s 5.5% growth target. Beijing may opt to cut lending rates soon to support growth. China’s consumer price index (CPI), due out on May 11, is expected to cross the wires at 1.9% y/y. A weaker-than-expected print would aid the PBOC’s route to ease policy.


This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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