Global Market Outlook - W/C January 22nd

US equities are running ever higher with the S&P 500 and the Dow Jones posting fresh all-time highs on Friday. A strong in big tech stocks is behind the latest leg higher and with the Q4 earnings season already up and running, strong results from any of the ‘Magnificent Seven’ will likely see US indices rally further. The S&P 500 is dominated by these seven companies with Microsoft on its own having a 7.29% weighting in the index.

S&P 500 Monthly Chart

The US dollar has enjoyed a strong start to the year as US Federal Reserve Members push back against what they perceive to be excessively bullish interest rate cut expectations. US Treasury yields have backed up, underpinning the US dollar against a range of other currencies. Precious metals have been under pressure this week with gold twice testing the $2,000/oz. level.

US Dollar Index Daily Chart

Aside from a raft of Q4 US earnings releases next week, the economic docket is packed full of high-importance data releases and events. The Bank of Japan Quarterly Outlook Report needs to be closely monitored, especially with USD/JPY at elevated levels, while Thursday’s ECB policy decision and Friday’s US core PCE release will be next week’s main attractions.

For all economic events and data releases, see the real-time

The Pound has been quite resilient to economic shocks, probably because they haven’t moved the dial on interest-rate views.

The ECB policy meeting on Thursday is the ideal place for central bank President Christine Lagarde to start to outline a rate cut timetable. Trouble is the meeting will likely follow the familiar ‘let’s wait and see the data’ script.

Gold revealed its vulnerability to further selling as a result of renewed vigor from the dollar and US yields. Fed members warn markets about overly optimistic rate cut bets.

This article examines the fundamental and technical outlook for the U.S. dollar, focusing on major FX pairs such as EUR/USD , USD / JPY , USD/CAD and AUD/USD .