Gold, Euro, USD, Yen Await Fed, ECB & BoJ; Big Tech Earnings Eyed

MARKET OUTLOOK:

• 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.

Most Read: Euro Forecast: EUR/USD and EUR/GBP’s Path Tied to Fed and ECB Policy Outlook

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

British Pound (GBP) Forecast: GBP/USD and GBP/JPY Outlooks Diverge

The British Pound turned lower against a range of currencies this week after inflation data missed expectations, but GBP/JPY moved higher Friday.

Australian Dollar Forecast: AUD/USD Sinks but US Dollar Might Be Key

The Australian Dollar has struggled to make ground despite strong local data as the US Dollar machinations continue to ricochet across markets. CPI lies ahead. Will it hit AUD/USD?

Japanese Yen Forecast: USD/JPY, EUR/JPY at the Mercy of Intervention Talk

Yen weakness continued this week and was met with comments from Japanese Officials on possible FX Intervention ahead of ‘Central Bank Week’. At what point will Japanese Officials step in

Gold and Silver Prices Forecast: XAU/USD and XAG/USD Left Uncertain as Gains Vanish

Gold and silver prices disappointed traders as these precious metals gave up their upside progress. Is this undermining the XAU/USD and XAG/USD outlook for the week ahead?

Crude Oil Forecast: Prices Supported by Oil Fundamentals as FOMC Looms

Crude oil prices look to US economic data for direction this week after 4th consecutive positive close for WTI.

Euro Forecast: EUR/USD and EUR/GBP’s Path Tied to Fed and ECB Policy Outlook

There are many high-impact events on the economic calendar next week, but the most important catalysts for EUR/USD and EUR/GBP will be the Fed and ECB monetary policy announcements.

US Dollar Forecast: Will Powell Quell the Recent USD Resurgence?

The US dollar pared a sizeable portion of the July selloff as G7 currencies broadly weaken. Will Powell leave the door open to more hikes or admit progress on inflation?

S&P 500, Nasdaq 100 Forecast: Overly Optimistic Sentiment Poses a Minor Setback Risk

US equity indices continue to make fresh year-to-date highs in a reflection of the uptrend. However, extreme optimism, overbought conditions, and overcrowded positioning pose a minor setback risk, especially if earnings disappoint.