S&P 500, Nasdaq 100, US Dollar, Gold, Japanese Yen, BoJ

Global market sentiment improved last week across the world’s stock markets. On Wall Street, S&P 500 and Nasdaq 100 gained +2.67% and 4.82%, respectively. As for Europe, the FTSE 100 and DAX 40 rose 1.88% and 3.26% respectively. Meanwhile, in the Asia-Pacific region, the Nikkei 225 and Hang Seng Index rose 1.16% and 3.56%, respectively.

Inflation in the US continued to slow down in December, reaching 6.5% year-on-year against 7.1% in November. It was in line with expectations though. As the energy component continues to weaken, food and shelter costs remained high. Still, markets took it as more signs that the Federal Reserve will soon end its hiking cycle.

Treasury yields fell, but the pace was noticeably slower than in recent weeks. Meanwhile, the US dollar continued to weaken. The DXY Dollar Index closed at its lowest level since June 2022. The top performing major currencies were the Japanese Yen, the Euro and the Australian Dollar. Gold prices rose 2.93% in their best week since April 2022 on bond yields and a weaker US dollar.

Turning to next week, once the Bank of Japan could be an interesting event for USD/JPY. Because it has since the central bank unexpectedly adjusted monetary policy in December increased speculation said that there may be more changes in the direction of normalization. Japan will also release December inflation at the end of the week.

Canada and the UK will also release CPI figures for USD/CAD and GBP/USD respectively. Meanwhile, the Australian Dollar will be heavily focused on Chinese GDP and another batch of local employment data. Earnings season is also slowly gathering. What else awaits the markets in the coming week?

How the Markets Performed – Week of 1/09

Key predictions:

US Stocks Forecast: S&P 500 Holds Up as Big Banks Hold Cash for 2023

Earnings at major U.S. banks proved largely flat, but warnings of possible credit squeezes sent the S&P 500 lower on Friday as banks bolstered cash reserves.

British Pound Fundamental Forecast: GBP/USD Turns to UK CPI After US Inflation

The British pound rose against the US dollar last week as softening US inflation data boosted the Federal Reserve’s less hawkish policy bets. GBP/USD is next converted to UK CPI.

Australian Dollar Outlook: Bullish vs Soft US Dollar

The Australian dollar rose on renewed optimism about China’s reopening and the US dollar, which hit the Fed’s remarks with market discounts. Will AUD/USD rise?

Dollar pushes past 7-month lows, but cooling in exchange rate forecast, VIX correlation important

A broader measure of the US Dollar – the DXY Index – fell to its lowest level since early June last week. The reversal looks fruitful, providing plenty of premium for 2022, but the underlying support for the move is less reliable than the bears appreciate.

Euro Fundamental Forecast – EUR/USD Could Be Short-Term Struggle

The recent sell-off in the US dollar can be clearly seen in the reborn EUR/USD, which continues to probe higher. Sterner tests for the bulls ahead.

Technical Forecasts:

US Dollar Technical Outlook: A Slide Showing Signs of Fatigue?

The US dollar’s broad decline remains intact, but the slide could slow or even pause as it nears key support across a number of currencies. What are the expectations and key levels in some major currency pairs?

Gold, Silver Price Forecast: Gold Breakout, Silver Resistance Test

Gold has shown great strength this week, but Silver has been struggling with the same resistance point for a month.

BTC/USD Forecast: Bitcoin bulls bounce back after double-digit rally

Bitcoin prices broke above key technical resistance on a weakening US dollar and a move above previous resistance at $17,792. Could BTC/USD retest 2017 highs and break $20,000?

S&P 500, Nasdaq, Dow Jones Technical Forecast for the Next Week

Stocks reacted strongly higher after the CPI data, and the S&P 500 is threatening to break out of the 2022 downtrend line that held last year’s highs.

— The text of the article was written by Daniel Dubrovsky, chief strategist for DailyFX.com

— Individual articles compiled by DailyFX Team members

To connect with Daniel, follow him on Twitter:@ddubrovskyFX