US and European futures are trading with caution as traders are concerned about the sell-off that took place over on Wall Street last week. Soaring inflation, weak economic growth and geopolitical uncertainty are some of the factors that are very much sitting on the dashboard of most traders.
Additionally, traders are going to remain focused on the big earnings reports which will be rolling in this week. When it comes to earnings, the focus is one important factor and that is how much of a downward revision we are going to see in their outlooks, given that inflation is still very anchored in its place.
Today, we are going to hear from the Bank of America, which is going to report its earnings after the bell, as well as the Wall Street giant, Goldman Sachs, which stands to report its numbers tomorrow before the market open. JP Morgan and Wells Fargo reported their numbers last week—the earnings reports were solid, something which is highly anticipated given that interest rates are on the rise. Morgan Stanley failed to impress the markets due to disappointment in its trading revenue numbers.
It is not only the banking sector that will report its earnings numbers this week, but we are also going to hear from the US tech sector as well. Companies like Netflix, Tesla, IBM will also report their numbers this week.
Forex
The focus will be on one currency and one currency mainly, and that is the British Pound. Prime Minister Liz Truss has appointed a new Chancellor of the Exchequer in place, and one could say at this stage that the mini-budget has only done harm to the British economy and its currency, as most of the policies that were announced will be reversed.
It appears that the UK will have to adopt strict austerity measures now in order to bring its economy back on track. But the timing of introducing austerity is not the best as the government will have to use austerity when the public is already struggling with higher interest rates which are going to only increase in the coming months and quarters. Increasing taxes, which is what the new Chancellor is hinting, will only increase the pressure on the British public as many are struggling to meet their daily needs already.
All of this means that Sterling is still not out of the woods yet; yes, the downside may be limited now, and one may say that threats of parity may have dissipated, but it would be wrong to say that the Sterling is going to move higher from here onwards.
Gold
Gold prices recorded another poor week in terms of their performance on Friday. The factor that influences the price of gold the most is the dollar index. It is pretty much clear that the Fed will continue to increase its interest rate, and there are no signs of them slowing down their monetary policy any time soon.
Traders will be paying close attention to the US Empire State Manufacturing index data which is due at 12:30 GMT, and the number is highly expected to bring more volatility for the dollar index. A strong number may push the dollar index higher, so we could see further weakness in the yellow metal’s price action.
Oil
Oil prices are likely to struggle to maintain their upward pressure, and this is mainly because there is a major threat to global growth. Central banks are increasing their interest rates, and they are finding it increasingly difficult to arrest inflation. For instance, James Bullard, over the weekend, once again played the same song about increasing interest rates.
On the other hand, we have OPEC, which is determined to keep the supply equation under control, and after announcing a production cut of 2 million bpd, traders believe that the cartel could announce more production cuts if prices begin to move lower.