Equities and cryptocurrencies took a hit this week as pick-up in US yields sparked risk aversion in the markets. Investors' attention will be focused on the FOMC meeting next week. However, there are also other events of note scheduled for the coming days, including the decision from Bank of Canada, flash PMIs and tech earnings. Be sure to watch USDCAD, US100 and DE30 next week.
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Expectations of a strong tightening from Fed roiled markets in the previous weeks. Investors will finally hear from the US central bank next week, when the FOMC announces a monetary policy decision on Wednesday (7:00 pm GMT). While moves like rate hikes or balance sheet reduction are not expected until March, some guidance may be offered. Apart from the Fed, investors will also get to hear from the Bank of Canada next week on Wednesday, 3:00 pm GMT. Expectations are mixed with some financial institutions even projecting the first rate hike of a cycle this week. USDCAD has been trading mostly flat this week following strong declines led by USD weakness earlier.
US indices took a hit this week as rising yields were pressuring risk assets. Tech Nasdaq-100 (US100) was one of the worst performers on Wall Street. However, this index may get a chance to recover next week thanks to an abundant tech earnings calendar. Investors will be offered reports from Microsoft on Tuesday, Intel and Tesla on Wednesday while Apple, Mastercard and Robinhood will release results on Thursday. While earnings are often seen as a chance for pivot in the markets, it should be noted that the Netflix report released this week contributed to downbeat moods on the broad market.
While FOMC and Wall Street earnings will be key factors for US indices next week, stock traders from Europe will focus on survey data. Flash PMI indices for January from the euro area will be released on Monday with German (8:30 am GMT) and French readings (8:15 am GMT) being the most closely watched ones. Slightly weaker readings are expected in both sectors, though the manufacturing sector is expected to remain in expansion in both countries. European indices have been surprisingly resilient recently compared to US peers with DE30 trading just 4% below all-time highs.
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