Global financial markets edge lower amid hawkish statements made by Fed Chairman Jerome Powell. The 0.50% rate hike by the Bank of England also surprised investors, as they anticipated only 0.25%. Another reason for the plummet of risk appetite lies with the negative news released last week and the rise of dollar demand, albeit to a limited extent.
A significant amount of important economic data will be published this week, which will undoubtedly have a notable impact on investor sentiment. Market players should look out for the reports on personal consumption expenditures, income and spending, and 1st quarter GDP in the US and the UK. CPI data in the eurozone will also hold considerable significance.
As GDP data indicate the overall state of the economy, it provides insight into the prospects of interest rate hikes, which currently dictate the financial markets. This means that better-than-expected figures will end concerns of recession, especially in the US.
Meanwhile, a slowdown in the consumer inflation values of the eurozone will exert pressure on euro, as the ECB would be inclined to pause its interest rate hikes, following the example of the Fed.
The report on US inflation should also be noted as growth higher than forecasts will stimulate the Fed's decision to raise rates by 0.25% by the end of summer. Such a scenario could be perceived negatively by markets, resulting in sell-offs of company stocks and a rise in dollar. But if the figures turn out to be below the projected values, demand for stocks will increase, along with a simultaneous weakening of dollar.
In short, the important economic data due out this week will drive market direction.
Forecasts for today:
XAU/USD
Spot gold bounced back after reaching the target level last week. A rise above 1933.75 will elad to a return to 1933.75-1983.75, with a local increase towards 1955.00.
GBP/USD
The pair fell below 1.2750 due to the Bank of England's decision to raise the interest rate by 0.50%. A climb above 1.2750 will result in a limited increase towards 1.2845.
