Markets Week Ahead: Gold Bid, US Dollar Struggles, US Equities Eye Fresh Highs

Markets Week Ahead: Gold, Euro, British Pound, US Dollar

US equities continue to press against recently made multi-year highs despite growing geopolitical risk. The coordinated US/UK action against Houthi rebels in Yemen is set to provoke reprisals, yet despite this, US equities are booming. The US earnings season started on Friday with a group of US banks opening the proceedings. In Asia, the Nikkei 225 continues to print new multi-decade highs as the Bank of Japan looks set to keep monetary policy looser for longer.

The US dollar has had a mixed few days and ends the week flat. Expectations remain that the Federal Reserve will cut rates six times this year for a total of 150 basis points, despite pushback from various Fed members, and this continues to weigh on the greenback. On the flip side, the dollar is getting a small bid due to the troubles in the Red Sea and surrounding area. In this environment, it is going to be difficult for the US dollar to make a concerted break, one way or another.

In the cryptocurrency space, eleven spot Bitcoin ETFs were finally approved by the SEC despite a week of mixed messages and fake tweets. Bitcoin traded just below $49k on Thursday before the market turned lower, leaving BTC/USD trading just below $43k. Despite the sell-off, Bitcoin retains a positive long-term outlook.

Bitcoin Daily ChartTechnical and Fundamental Forecasts – w/c January 15th

Recent bullish price action, combined with unimpressive GDP figures, provides a very uncertain landscape for the pound in a big week for UK data.

The euros lack of volatility underscores key horizontal levels and the potential for range trading. EU inflation and updated sentiment data are unlikely to move the dial significantly.

Escalating tensions in Yemen have boosted golds allure going into the weekend and with short-dated US Treasury yields falling further, XAU/USD may have more room to run.

This article explores the week-ahead outlook for the U.S. dollar, examining important catalysts that could guide the performance of key currency pairs such as EUR/USD, GBP/USD and USD/JPY.