Investors across all markets are hopeful that the ceasefire between the USA and Iran will prove durable and finally allow for the reopening of the Strait of Hormuz. While oil prices have dipped, they remain at elevated levels. Euphoria is primarily visible in the equity markets, where we are witnessing record-high valuations. The coming week will bring several significant macroeconomic readings; however, global attention will continue to focus largely on the Middle East. It is also worth noting that the Wall Street earnings season is in full swing, which could significantly impact the sustainability of index prices at their historical peaks. Consequently, in the week ahead, it is worth paying close attention to instruments such as GBPUSD, GOLD, and US500.
GBPUSD
The number of macroeconomic readings for both the pound and the dollar will be impressive in the coming days. On Tuesday, we will see UK employment data and U.S. retail sales figures. Wednesday will bring the UK CPI inflation report, which could be crucial in determining the interest rate outlook in the country. Currently, the market is pricing in only a 40% probability of a single hike by mid-year, whereas at the end of March, the odds were estimated at nearly two hikes. Regarding monetary policy, Kevin Warsh’s hearing before the U.S. Senate Banking Committee will be pivotal. His remarks may indicate the direction the Fed will take following Jerome Powell’s departure. Additionally, on Thursday, we will see preliminary PMI readings for the industrial sectors in both the UK and the USA.
GOLD
Gold prices remain largely dependent on sentiment surrounding the situation in the Middle East. Paradoxically, an escalation of the conflict can exert downward pressure on the bullion due to the risk of higher future inflation and subsequent restrictive actions by central banks. Conversely, improving sentiment supports gold prices as inflationary risks subside, reducing the chances of a return to interest rate hikes. In this context, Tuesday’s hearing of Kevin Warsh will be extremely important for the gold market. It should also be remembered that as peace signals emerge from the Middle East, investor attention will shift toward other risk factors that should support the precious metal. Rising global debt and progressing de-dollarization are fundamentals that could drive the continuation of the bull market, provided it is not halted by a potential return to hawkish monetary policy.
US500
Wall Street indices have managed to climb to new historical highs despite the still-blocked Strait of Hormuz. It appears that American investors have considered this issue nearly resolved. If this optimism holds, the market will shift its full focus to corporate financial reports. So far, most giants have presented solid results, although market reception has been mixed. In the coming days, we will see reports from companies such as Tesla, IBM, AT&T, and Boeing (Wednesday), as well as Caterpillar and Intel (Thursday). Also on Thursday, a vote is scheduled regarding the merger offer between Warner Bros. Discovery and Paramount Skydance, which could trigger additional volatility in the media sector.
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