Dow Jones, S&P 500, Gold, US Dollar, Recession Woes, CPI, ECB

Global risk appetite deteriorated this past week. On Wall Street, the Dow Jones, S&P 500 and Nasdaq 100 sank 4.44%, 4.55% and 4.71%, respectively. Things were not looking much better across the Atlantic Ocean. The DAX 40 and FTSE 100 fell 0.97% and 2.5%, respectively. In Asia, Australia’s ASX 200 and Hong Kong’s Hang Seng Index dropped 1.91% and 6.07%, respectively.

A lot of the pessimism was traced back to the United States. The collapse of SVB Financial and news that Silvergate Capital Corp, a crypto-specialized bank, would be winding down operations triggered risk aversion. As a result, we saw Treasury yields tumble across the curve as markets priced in a less-hawkish Federal Reserve.

In fact, market pricing is now looking at lower odds of a 50-basis point rate hike this month. Markets also priced in a 25-basis point rate hike by the end of this year. Anti-fiat gold prices fared well. The anti-fiat yellow metal soared 2.06% on Friday, the most over 24 hours since November 10th. Sentiment-linked crude oil prices did not fare well.

Whether or not the collapse of SVB Financial triggers a chain reaction remains to be seen. But, it is understandable that markets are on edge. The fastest pace of tightening in decades will reveal weaknesses in the economy and create uncertainty. Just look at the VIX market ‘fear gauge’, which soared 34% last week. That was the most since January 2022.

Outside of watching the health of the US banking sector, there are key economic events due. February’s US CPI report is due on Tuesday. For the Euro, we will also get the next European Central Bank rate decision. AUD/USD will be closely eyeing a local jobs report. What else is in store for markets in the week ahead?

How Markets Performed – Week of 3/06

Fundamental Forecasts:

Euro Week Ahead Forecast: Will ECB Hawks Gain the Upper Hand on Rate Hikes?

The ECB is expected to hike rates by 50 basis points next Thursday and indicate that they will continue to hike aggressively to press down on inflation.

US Dollar Forecast: Inflation Data May Revive Rally but SVB Meltdown Poses Risks

The US dollar has given up all the gains induced by Powell’s hawkish comments due to a slump in yields following the SVB meltdown, but US inflation data could revive the greenback’s recovery.

Gold Price Weekly Outlook: XAU/USD Fate in the Hands of US CPI?

Gold prices get their shine back but will upcoming US CPI data limit upside? XAU/USD bulls look to hold onto 1850 as support.

GBP Fundamental Forecast: Sterling Struggles Ahead of Spring Statement, US CPI

The pound has been in a broad decline, apart from cable which has been dominated by the USD sell-off. Next week’s Spring Statement ought to add to sterling volatility.

Technical Forecasts:

US Dollar (DXY) Technical Forecast: DXY at the Mercy of US Data with Inflation Ahead Next Week

The Dollar Index (DXY) finished the week with a whimper as Friday’s US data came in mixed. Bullish structure remains intact above the 104.30 level.

Gold Price Forecast: XAU/USD Heads Toward $1880 After Strong Recovery

Gold prices surged for the second week after rebounding off the 100-week moving average now holding as support around $1,813. Can bulls drive XAU/USD to $1,880?

S&P 500, Nasdaq 100, Dow Jones Technical Forecast: Bearish Breakouts in Focus

The S&P 500, Nasdaq 100 and Dow Jones sank last week on bank sector contagion woes. From a technical standpoint, this is leaving Wall Street increasingly vulnerable in the week ahead.

— Article Body Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

— Individual Articles Composed by DailyFX Team Members

To contact Daniel, follow him on Twitter:@ddubrovskyFX