Markets Week Ahead: Gold, Euro, USD, Yen Await Fed, ECB & BoJ; Big Tech Earnings Eyed
- Interest rate decisions by the Fed, the European Central Bank and the Bank of Japan will steal the spotlight next week
- The second quarter U.S. GDP report and June PCE data are other highlights on the economic calendar
- Investors will also be paying attention to earnings season, with Microsoft, Alphabet and Meta reporting results in the coming days.
Volatility is likely to increase sharply across markets in the coming week, with several major central banks expected to announce interest rate decisions.
Focusing first on the Federal Reserve, the FOMC is seen raising borrowing costs by 25 basis points to 5.25%-5.50% at the conclusion of its July meeting on Wednesday. Investors have already discounted this move, so the focus will be on forward guidance.
If the Fed maintains a hawkish bias and continues to signal that more work is needed to restore price stability, interest rate expectations will drift higher, boosting the U.S. dollar and creating a negative backdrop for gold prices and risk assets, such as stocks.
Turning to the ECB, the institution led by Christine Lagarde is also forecast to deliver a quarter-point hike, but it may sound non-committal about further tightening, given the deterioration of growth in the eurozone. Should this scenario play out, the euro could be at risk of a sharp bearish reversal.
As for the Bank of Japan, the monetary authority is expected to maintain its policy settings unchanged, but they may undertake initial talks about altering the yield curve control program at some point later in 2023 if inflation continues to trek upwards on a sustained basis.
If BoJ guidance suggests that policymakers are preparing to withdraw some accommodation in the near future, the yen could stage a strong rally, but if the policy outlook remains extremely dovish and does not point to a change in course, the Asian currency could take a hit against higher yielders.
Aside from key central bank decisions, there are other important events on the economic calendar, such as the second-quarter US gross domestic product report and June PCE data. Both releases can help traders assess the health of the U.S. economy, as well as the path of inflation, with higher-than-expected results arguing in favor of additional Fed tightening.
KEY MARKET EVENTS NEXT WEEK
Source: DailyFX Economic Calendar
Last but not least, traders should also pay attention to the ongoing earnings season. Some of the largest technology companies by market cap are expected to announce quarterly results, including Microsoft, Alphabet and Meta to name a few. Check out DailyFX’s earnings calendar for a more complete list of the top companies announcing their revenue and EPS in the coming days.
This year, tech stocks have rallied and re-rated sharply on the back of the artificial intelligence frenzy. To justify premium valuations and sustain their performance, these companies will need to demonstrate earnings resilience and be able to expand margins while growing their top and bottom- lines, otherwise, they could be in for a rude awakening.
FUNDAMENTAL AND TECHNICAL FORECASTS
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