Week’s Focus Will Be US Inflation Data and Bank Earnings – Forex Anatomy

Week’s Focus Will Be US Inflation Data and Bank Earnings

Greetings Traders! I hope you are well-rested and prepared to start a new week of profitable trading!

My brother and I took an extended break, but we are excited to be fully jumping back into trading this week. Financial markets in 2023 have already shown a jittery side during the first week of the year, with price action choppy & volatile, as investors assessed what the softening global PMI readings, along with the tight US Labor market conditions will mean for the future of central bank rate policy. This week we’re expecting to see a follow-through of those same concerns as traders brace for the next tranche of **US CPI data, UK Monthly GDP, ECB Meetings Minutes,  China Trades Balance data, and the first week of US Q4 2022 Earnings reports.**

With increasing signs that inflation may have peaked across multiple surveys & indicators, it appears that market participants are now focusing more of their attention on recession fears and the timing of a Fed pivot. Although Fed Chair Powell & Co have clearly communicated their plans to continue hiking rates into restrictive territory, above 5.00% (higher for longer), the US bond market is not too convinced that rates will have to be raised that high, and Fed Fund Futures ($ZQ) are already pricing in rate cuts in the last quarter of 2023. This divergence between Fed speech and Main Street has caused traders to remain idle and hedge their bets solely on the day-to-day market headlines, and important economic data. For the second half of this week, all eyes will be on the US CPI inflation story and the picture it paints for the US Dollar and stock market valuations in the first week of earnings season.

Forex Current Pre-Market Open Levels For New Week (January 9, 2023):

EUR/USD – 1.0641 (-3 pips lower)
USD/JPY –  131.94 (-15 pips lower)
GBP/USD – 1.2088 (-8 pips lower)
USD/CHF – 0.9282 (+3 pips higher)
USD/CAD – 1.3444 (-1 pip lower)
AUD/USD – 0.6881 (-6 pips lower)
NZD/USD – 0.6337 (-9 pips lower)

On today, spot FX markets are expected to open with bias leaning in favor of a stronger dollar. Cryptocurrency markets have been slightly different with more demand in digital coins which is underpinning price. At the moment, $BTC is stabilizing around the $16,970/btc level after failing to secure the $17,000 handle overnight. Sentiment on the dollar ($DXY) is still tentative, but most indicators are pointing to a firmer greenback at the start of this week. However, this Pre-Market dollar sentiment may change as more trading houses open up for the week, and as liquidity grows throughout the session.

About the Author Marvin Perry

Marvin Perry has been an active trader within the Forex market since 2010. He attended the University of Illinois in Urbana/Champaign, and graduated in 2002 with a double major in Cell and Structural Biology and Chemistry. He currently serves as an FX instructor & Quantitative Analyst for the Forex Anatomy Private Trading Community called "The Lab", where he conducts live weekly trading webinars & instruction on Fundamental Analysis & Inter-Market Interpretations of dynamic asset classes and their influence on currencies.

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