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Weekly Market Preview
Friday, Jan 26, 2023
Last week, the investor’s focus was on the US GDP data (Q4-23) which pleasantly surprised with a growth rate of 3.3%, surpassing the anticipated 2%. Despite a decline from 4.9% in (Q3-23) the fourth-quarter growth figure indicates sustained consumer spending capability. Meanwhile, the European Central Bank meeting unfolded as expected, maintaining interest rate unchanged at 4%.
This week, investors are eagerly anticipating key economic data, notably the European GDP data for (Q4-23). Expectations suggest a potential contraction of the European economy by 0.1%, following a similar contraction in the third quarter. A negative result would thrust the Eurozone into technical recession, intensifying pressure on the European Central Bank to accelerate its plans of rate cuts. Conversely, any growth (above 0%) would signal an escape from recession, possibly deferring the expected interest rate cuts to the June meeting.
Another pivotal event on the horizon is the Federal Reserve’s interest rate decision, projected to maintain rates at 5.5%. However, investors are keenly observing the Fed’s upcoming policy, particularly seeking hints in Mr. Powell’s speech regarding the potential timeline for initiating interest rate reductions this year. Any suggestion of a possible start in the March meeting (though improbable) could negatively impact US dollar prices.
It’s noteworthy that the Fed Chair might reiterate its data dependence policy, based on the evolution of inflation rates and labour market data. At the week’s end, the US jobs report for December will be released, with expectations hinting at the addition of 162,000 jobs. A figure surpassing this would provide grounds for Federal Reserve members to maintain higher for longer interest rates, benefiting US dollar prices. Conversely, any lower-than-expected reading would not favour the strength of the dollar.
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