Remarks from Janet Yellen on interest rates sent stock markets lower at the beginning of the week. While most major US indices managed to recover in the later part of the week, tech stocks continue to lag. Elsewhere, gold rallied above $1,800 on the back of USD weakening. Be sure to watch GOLD, US100 and GBPUSD in the week ahead.
Gold price made its way above $1,800 handle this week and reached the highest level since mid-February. Weakening of the US dollar provided a boost for precious metals including gold. While correlation between inflation and gold is no longer as strong as it used to be, price growth remains an important factor for precious metals. Having said that, gold traders should keep on guard on Wednesday at 1:30 pm BST as US CPI reading for April will be released.
Nasdaq-100 (US100) has been the worst performing major US index this week. Yellen's comments on possible need for interest rate hike spooked investors. Nasdaq took the biggest hit as companies from the index seem to be the most sensitive to change in the level of interest rates. While Yellen backtracked on her comments later on, US100 is struggling to fully recover. Discussion about the need for policy tightening will only intensify as the time passes and may become an important driver for the index.
Bank of England said it has slowed emergency bond buying amid improved outlook for the UK economy. Moreover, BoE Governor Bailey said that the UK economy will recover to pre-pandemic levels earlier than expected, thanks to rapid vaccinations and potential for full reopening in June. GBP traders will be offered hints on how the UK economy performed in the January-March period as the Q1 GDP report will be released on Wednesday (7:00 am BST).
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