Investors worldwide are on high alert this week as they brace for pivotal updates from the United States that could influence market dynamics significantly. The spotlight is on the US inflation update, alongside earnings reports from major banks and Taiwan Semiconductor Manufacturing Company (TSM). These developments come against a backdrop of a robust US Dollar, sustained by hawkish Federal Reserve expectations following an unexpectedly strong Non-Farm Payroll (NFP) report.
The US economy added over 250,000 nonfarm jobs in December, surpassing forecasts by approximately 90,000. This impressive job growth has contributed to a drop in the unemployment rate to 4.1%. However, wages growth slightly softened, moving from 4% to 3.9% on an annual basis. The strong labor market data has fortified the US Dollar's position, with heightened Fed rate hike expectations putting pressure on gold gains and sustaining elevated US bond yields.
Meanwhile, the Euro faces challenges, trading in negative territory below 1.0250 in the European session on Monday, after testing the 1.0200 mark. The currency's struggles are attributed to dovish commentary from the European Central Bank (ECB). On the other hand, the British Pound is experiencing decent selling pressure in the GBP/USD pair, which hovers near 1.2150.
In commodity markets, US crude oil prices have surged in response to fresh sanctions imposed by the US and UK on Russian oil companies and vessels. This move has introduced additional volatility into the energy sector as geopolitical tensions continue to influence supply dynamics.
Cryptocurrency markets also witnessed significant activity as top altcoins Solana and Cardano extended their corrective phase on Monday after a decline exceeding 11% in the previous week. Technical analysis suggests a continuation of this pullback, with projections indicating a potential double-digit crash.
Gold prices have attracted some dip-buyers at the start of the week, holding firm near a one-month peak established last Friday. However, hawkish Fed expectations and a bullish USD have capped gains for XAU/USD.
The new week presents a full economic and corporate calendar, with market participants keenly monitoring events to gauge potential impacts. US yields and the dollar have shown strength, while equities experienced declines and the VIX index flirted with the 20 level, signaling increased market volatility.