As the markets recalibrate from the recent rate and dollar surge, all eyes this week turn to the US CPI and retail sales data for January, potentially marking a pivotal moment for future rate adjustments. With the Federal Reserve’s rate cut expectations pushed further into the year, the upcoming reports on inflation and consumer spending are keenly awaited for clues on the economic trajectory and its impact on currency markets. 

US Economic Outlook: a soft landing? 

The upcoming CPI report for Tuesday is expected to reveal a slight deceleration in inflation, with headline inflation anticipated at 2.9% year-over-year, a decline from December’s 3.4%, while core inflation, excluding volatile food and energy prices, is predicted to slow to 3.7% from 3.9%, largely influenced by decreasing used car prices, indicating a gradual path towards inflation normalization. Additionally, retail sales data set to release on Thursday may indicate a slight contraction, with forecasts suggesting a 0.2% drop, potentially due to subdued auto sales, signaling a modest beginning to the year for consumer spending. Despite this, broader economic indicators such as industrial production project an economy expanding slightly above the Federal Reserve’s long-term sustainable rate. 

Global context: inflation and growth dynamics 

Internationally, the UK’s CPI data and Q4 GDP reports from the UK and Japan will offer additional insights into global inflation trends and economic health. The expected fluctuations in inflation rates, particularly with the anticipated sharp declines in year-over-year comparisons for the UK, eurozone, and Canada, will be critical for currency traders monitoring the global economic pulse. 

Implications for currency markets 

For currency markets, particularly forex traders at VT Markets, these economic indicators are crucial. A softer-than-expected CPI and weak retail sales could cap US rates, potentially halting the dollar’s rally. Moreover, global economic data will provide further context for the forex market, influencing currency pairs and trading strategies. 

As we navigate through these economic releases, traders should remain vigilant, adapting strategies to accommodate the evolving market landscape. The anticipated data not only offers insights into the US economy’s health but also shapes expectations for central bank policies across the globe. 

Stay tuned to VT Markets for real-time analysis and insights on how these developments impact currency markets and trading opportunities. 

Conclusion: a week of economic revelations 

The week ahead promises to be a crucible of economic revelations, with US CPI and retail sales data at the forefront. As we dissect these indicators, their broader implications for interest rate policies, currency markets, and global economic health come into sharper focus. For market participants, these moments are not just about interpreting numbers but about understanding the narratives they weave and the market directions they suggest. In the ever-evolving world of forex trading, such insights are invaluable, guiding strategies in a landscape where precision and foresight are paramount. 

CURRENCIES:

• Gold Price Trends: Gold prices declined due to an increase in U.S. Treasury yields and a stronger U.S. dollar.
• Currency Market Movements: The EUR/USD and GBP/USD experienced slight drops but remained above critical technical levels.
• Anticipation of U.S. Inflation Data: The upcoming U.S. inflation report is expected to significantly influence market volatility in the following week.
• Stock Market Performance: Despite the pressure from rising bond yields, U.S. stocks, including the S&P 500 and Nasdaq 100, achieved record highs.
• U.S. Dollar Strength: The U.S. dollar has been on an upward trend for four weeks, affecting currency pairs like EUR/USD, GBP/USD, and leading to a notable rally in USD/JPY.
• Potential Market Reactions to CPI Report: The January inflation data release could lead to substantial market fluctuations, with traders advised to brace for potential sharp price movements.
• Impact of Inflation on Markets: An inflation rate exceeding expectations could boost U.S. yields and the dollar but negatively affect stocks and gold. Conversely, lower-than-expected inflation figures might decrease yields, weaken the dollar, and support equities and gold prices in the short term.

STOCK MARKET:

• Economic data: New York Fed one-year inflation expectations, January (3.01% previously)
• Earnings: Avis Budget Group (CAR), Monday.com (MNDY), Waste Management (WM), Zoominfo Technologies (ZI)
• Key Market Indicators: Inflation, retail sales, and corporate earnings are pivotal factors for the market this week.
• S&P 500 Milestone: The S&P 500 surpassed the 5,000 mark for the first time, continuing a positive trend seen in recent weeks.
• Corporate Earnings Reports: About 15% of S&P 500 companies, including John Deere, Coinbase, Airbnb, and Shopify, are scheduled to report their earnings.
• Inflation Expectations: The Consumer Price Index (CPI) for January is anticipated, with an expected annual gain of 2.9%, signaling a decrease from December’s 3.4%.
• Core Inflation Forecast: Excluding food and energy, core inflation is projected to have risen by 3.7% year-over-year, with a monthly increase of 0.3%.
• Consumer Spending Outlook: January’s retail sales report is awaited, with an expected 0.2% decline from the previous month, influenced by seasonal factors and weather disruptions.
• Automotive Industry Earnings: Stellantis is set to report its earnings, with attention on its performance and electric vehicle (EV) strategy following positive surprises from Ford and GM.
• Earnings Performance: So far, 75% of S&P 500 companies have reported earnings, showing a trend towards the second consecutive quarter of earnings growth.
• Analyst Insights: High earnings beat rates among U.S. companies suggest strong market performance, with expectations of continued earnings growth over the next two years.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

CURRENCIES:

US Dollar and Upcoming CPI Report:

• DXY index rose, influenced by higher U.S. Treasury yields.
• Market awaits January inflation data; headline CPI expected to slow to 3.1%, core CPI to 3.8%.
• Higher than expected inflation could boost U.S. dollar by altering Fed rate cut expectations.
• Lower inflation may lead to dovish rate expectations and a weaker dollar.

Technical Analysis for Currency Pairs and Gold:

• Focus on EUR/USD, GBP/USD, and gold (XAU/USD) technical outlook.
• Key support and resistance levels highlighted ahead of U.S. CPI release.

STOCK MARKET:

Stock Market Highlights

S&P 500 Valuation Insights:

• The S&P 500’s forward price-to-earnings ratio increased to 20.4, surpassing its historic average.
• Despite high valuations, equities can remain costly before normalizing.
• The index rose 21% since late October, nearing a significant 5,000 level but closed just below it.
• Rising stock valuations contrast with increasing Treasury yields, hinting at competitive investment options.
• Earnings forecasts for S&P 500 companies remain stable, with a 9.7% growth expectation for the year.
• High valuations often lead to modest future performance, but current levels are below the extreme peaks of past market bubbles.
• The index’s valuation is heavily influenced by the “Magnificent Seven” megacap stocks, trading at higher earnings multiples.
• Lesser signs of speculative excess compared to past market peaks suggest a different market environment.

Start your CFD Shares Trading journey with VT Markets now!

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

CURRENCIES:

Gold Price Trends and Influences

• Gold prices have been fluctuating, stuck in a consolidation phase as they await new catalysts.
• Upcoming U.S. inflation data could significantly influence gold’s price direction in the near term.

Impact of Federal Reserve’s Monetary Policy

• The Federal Reserve’s stance on interest rates is a crucial factor for gold’s future movements. Current signals suggest no immediate rate cuts, which may dampen gold’s appeal.

Inflation Data and Gold’s Reaction

• Expected U.S. inflation rates and their potential impact on gold are discussed, with specific projections for January’s CPI.
• An unexpected high inflation report could negatively affect gold prices by adjusting interest rate expectations.

Outlook Based on Inflation Outcomes

• Lower-than-expected inflation could boost gold prices, possibly affecting market expectations for future rate cuts.

STOCK MARKET:

Stock Market Highlights

• The S&P 500 reached a new record high, closing at 4,995, with the 5,000 mark in sight.
• U.S. stocks rose, influenced by quarterly earnings reports and ongoing discussions about interest rate cuts.
• Despite mixed earnings, notable movements included Alibaba’s shares dropping after a revenue miss and Snap’s significant decline following a disappointing profit forecast.
• Disney announced a 50% increase in its cash dividend after reporting strong earnings, leading to a post-market share price surge.
• Federal Reserve officials suggest no immediate rate cuts, with a focus on inflation trends before any policy adjustments.
• Concerns around regional banks and the real estate sector were sparked by troubles at New York Community Bancorp, despite a slight recovery in its share price.

Start your CFD Shares Trading journey with VT Markets now!

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.