We’re seeing plenty of caution in the markets this week which is perhaps not entirely surprising given what lies ahead.
Earnings season isn’t going as well as hoped and there are some big names coming up this week that could potentially dampen the mood further. It was always going to be a challenging period given the level of economic uncertainty, not to mention the staggering number of layoffs we’re seeing, in the tech space in particular.
Then we have the various central bank announcements, the most notable of which of course is the Fed, which could bring some relief if we hear any softening in the hawkish tone alongside a 25 basis point rate hike. There’s now a solid body of evidence that the rate hikes are having a big impact which could warrant ending the tightening cycle very soon.
This will be followed by the ECB and BoE on Thursday, both of which are expected to stay in the 50 basis point camp. The commentary will once again be crucial here though, especially with the latter given the weak forecasts for the economy this year, an updated version of which will be released by the BoE alongside the decision.
And finally, we’ll get the latest jobs data from the US, which is expected to show a further slowing of job growth, a slight increase in unemployment, and another month of modest earnings growth. In other words, exactly what the Fed will want to see as it draws the tightening cycle to a close.
Oil prices are a little lower again on Tuesday, matching the mood elsewhere broadly as investors become less confident in the outlook for the economy. It also comes as the OPEC+ panel is expected to recommend keeping output steady, with the uncertainty around the global economic outlook also likely clouding their forecasts for demand. I’m sure we’ll see plenty more shifts in sentiment in the coming weeks which will ensure oil remains very volatile as we move through the first quarter of the year.
Profit-taking ahead of the Fed
We’ve seen some profit-taking in gold in recent days, with a stronger dollar enabling such a decline. What’s interesting is that gold rebounded strongly today around $1,900 and is now relatively flat on the day, which could be viewed as a bullish signal. I expect this will remain very choppy over the next 24 hours or so as we await the latest Fed decision.
Poised for a correction?
The bitcoin rebound may have lost some momentum but it’s still managing to hang on to the bulk of the gains from recent weeks. It appears to have found some support around $22,500 with resistance then coming around $24,000. It could be argued that the lack of momentum is a sign of it being poised for a correction but the reality is that may ultimately depend on the Fed, as opposed to anything else.