Dow Jones, S&P 500, US Dollar, Gold, British Pound, US CPI

Global market sentiment improved to start off the first week of 2023. On Wall Street, the Dow Jones, S&P 500 and Nasdaq 100 rallied 1.23%, 1.19% and 0.87%, respectively. Across the Atlantic, the FTSE 100 and DAX 40 gained 2.49% and 4.93%, respectively. Meanwhile, in the Asia-Pacific region, the Hang Seng Index and ASX 200 rose 6.33% and 1.28%, respectively.

Switching to currencies, it was a mixed bag for the US Dollar. The Euro and Japanese Yen underperformed while the Australian Dollar and British Pound outperformed. You would have to look at Treasury yields to see where the real story was. The 10-year rate dropped the most since February 2022. Falling bond yields helped gold soar 2.38%, the most since late November.

Traders focused on slowing average hourly earnings and a miss in US ISM services data, cooling longer-term hawkish Federal Reserve policy bets. Meanwhile, improving confidence in China’s economy helped push the Yuan higher as the Hang Seng Index closed at its highest since July 2021. Warm weather in Europe helped drive crude oil lower.

Ahead, all eyes will be on the closely watched US inflation report due on Thursday. Softer average hourly earnings likely set expectations for a further cooldown in CPI. Meanwhile, Sterling traders will be awaiting the latest United Kingdom GDP figures. What else is in store for markets in the week ahead?

How Markets Performed – Week of 1/02

Fundamental Forecasts:

S&P 500, FTSE 100, Hang Seng Outlook Different Levels of Delirium

Depending on what benchmark ‘risk’ asset you refer to you, it could seem that the fundamental outlook for the global markets was encouraging – borderline exceptional. The reality is higher rates, probable recession and other issues that follow. So what to make of the S&P 500’s hold, FTSE 100’s proximity to records and Hang Seng’s surge?

GBP Fundamental Forecast: Festive Cheer Ends and UK PM Seeks End to Strikes

Sterling remains vulnerable as companies issue trading warning for 2023. Trade unions continue with strikes and government plans to cut energy relief for corporates.

Australian Dollar Outlook: Volatility Kicks in for 2023

The Australian Dollar had a bumpy ride into the new year with Chinese policy adjustments and US Dollar fluctuations running amok. Will AUD/USD find its own path?

Euro 6-Week Winning Streak Ends, Will Softer US CPI Rekindle EUR/USD?

The Euro’s 6-week winning streak came to an end. But, disappointing US hourly earnings and ISM services data sets a sour tone for key CPI data next. EUR/USD may rise.

Gold Fundamental Price Outlook: XAU/USD Primed for the Next Leg Higher

The precious metal continues to be in the thrall of US rate expectations and with yields starting to reverse lower from their recent elevated levels, gold may soon attempt to make a fresh multi-month high.

Technical Forecasts:

US Dollar Technical Forecast: EUR/USD, GBP/USD, USD/CAD, USD/JPY

The US Dollar posed a bullish breakout from the three-week range but aggressively snapped back after a disappointing PMI release, highlighting growing impact from the Fed’s rate hike strategy.

Gold (XAU/USD) Rips Higher – $1,850 Support Holds at Prior Resistance

Gold has benefited from a softer weakness despite a slight pullback ahead of US NFP’s. As XAU/USD rises above $1,850, the next barrier of resistance has started to form.

Japanese Yen Technical Forecast: Mixed Bag for Japanese Yen Technicals

Technical patterns are providing mixed signals; Will the BoJ’s continued support of the Yen encourage JPY bulls to return?

— 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