Weekly Financial Markets Overview 22.01.2024

Market Insights and Currency Trends: Navigating the Economic Landscape in 2024

The dollar is starting the year on a high note with strong economic indicators. Following robust non-farm payroll numbers and an increase in CPI inflation, American bulls are pleased with the pace of consumer demand, which is currently near annual highs (grew by 0.6% MoM in December vs. 0.3% MoM).

This data managed to temper the bearish pressure in the United States as they anticipate a potential policy easing by the Federal Reserve at the March meeting. Last week, 70% of analysts on the SME website advocated for the first rate cut in March; now, the number has reduced to around 42%. The Greenback is currently trading in a broad range against many currency pairs.

As for the current week, key fundamental events include the ECB meeting on Thursday and several important economic reports that could impact market expectations regarding central bank monetary policies. Notably, Friday's US RCE inflation report is crucial, and the Fed will pay special attention to the fourth-quarter US GDP on Thursday, as Powell has stated that above-trend economic growth could lead to a rate hike (or, at least, delay the start of the interest rate reduction cycle).

Let's not forget about continental data—Eurozone and UK PMIs for January, in their initial readings on Wednesday, are of particular interest, as a decline in the European economy could provide support for the dollar.

Looking at the domestic market, the dollar's rise against the Russian ruble faded by the end of the week. On Friday, the USD/RUB pair shed nearly one percent, reaching 88.22 rubles. As mentioned earlier, the nearest key level for a sentiment shift in the pair—90 rubles—played its role, pushing quotes back towards the 85 level. Additionally, the Russian currency is receiving extra support with the approaching peak of tax payments on January 29—during this period, there is traditionally an increased demand for rubles, resulting in their appreciation.

Oil is currently experiencing a period of stagnation—prices are hovering around the $78 mark, contemplating the next route. The nearest support for oil bulls is at the 77.5 level, and with buyer reaction near it, the target could be set at $80. It's crucial to keep an eye on fundamental factors and stay tuned to developments in the Middle East—an escalation of conflict in the region could favor black gold due to potential disruptions in resource supply.

What's important on Monday?

There are no significant events on the agenda for today, but noteworthy are Christine Lagarde's speech at 17:00 MSK and the US Leading Economic Index (Dec) at 18:00 MSK. Liquidity is likely to be low, and the main currency battles will unfold in the middle of the week.

Wishing you success and well-considered investment decisions!