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

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Global risk appetite worsened last week. On Wall Street, the Dow Jones, S&P 500 and Nasdaq 100 fell 4.44%, 4.55% and 4.71% respectively. Things did not look much better across the Atlantic. 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 fell 1.91% and 6.07% respectively.

Much of the pessimism was traced back to the United States. The collapse of SVB Financial and news that Silvergate Capital Corp, a crypto-specialist bank, would wind 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 prices are 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 rose 2.06% on Friday, the most over 24 hours since November 10. Sentiment-related crude oil prices did not fare well.

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

In addition to watching the health of the US banking sector, there are important economic events coming up. February’s US CPI report will be released on Tuesday. For the euro, we will also get the next interest rate decision from the European Central Bank. AUD/USD will closely follow a local jobs report. What else is in store for the markets in the coming week?

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How Markets Did – Week 3/06

Basic forecasts:

Forecast for Euro Week Ahead: Will ECB Hawks get the upper hand on interest rate hikes?

The ECB is expected to raise interest rates by 50 basis points next Thursday, indicating it will continue to raise aggressively to push down inflation.

US dollar forecast: Inflation data could revive rally, but SVB meltdown poses risks

The US dollar has given up all the gains made by Powell’s hawkish comments due to a drop in interest rates following the SVB meltdown, but US inflation data could revive the greenback’s rally.

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

Gold prices are regaining their luster, but will upcoming US CPI data limit the upside? XAU/USD bulls look to hold on to 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 USD sales. Next week’s spring statement should add to UK volatility.

Technical forecasts:

US Dollar (DXY) Technical Forecast: DXY at the mercy of US data with inflation ahead next week

The dollar index (DXY) ended 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 towards $1880 after strong recovery

Gold prices rose for a second week after bouncing back from the 100-week moving average, now holding 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 fell last week due to contagion problems in the banking sector. From a technical standpoint, this leaves Wall Street increasingly vulnerable in the coming week.

— Article text written by Daniel Dubrovsky, Senior Strategist for

— Individual articles composed by DailyFX team members

To contact Daniel, follow him on Twitter:@ddubrovskyFX

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