Benchmark global equities indices are back under pressure this week as the rebound in the US dollar weighs on asset prices. The current USD drive looks to be linked to comments made yesterday by Fed’s Bullard, who noted that the current pace of inflation would likely warrant higher interest rate increases than currently projected for 2023.
Currently, the dot plot forecasts show two hikes for next year. However, given the firm hawkish shift we have heard from the Fed, there are clear upside risks in these forecasts. With this in mind, incoming US data will be key to mapping USD and equities flows alike.
Markets have also been rattled today by news of the UK sending troops to the Ukrainian border amid an increasing number of news headlines citing that a Russian invasion might be imminent. With tensions heating up, there are concerns of a broader global dispute emerging from hostilities in the region.
There is an absence of any tier one US data. However, we do have a slew of other key readings including the UK and Canadian CPI and retail sales as well as Aussie employment data.
Strong readings in these releases will undoubtedly add to the market’s focus on central bank tightening expectations for Q1, keeping equities pressured near term.
Technical View - DAX
The DAX’s failure at the latest test of the 16292.21 level risks forming a double top formation, with price now testing the rising trend line and support area around 15743.01. With MACD and RSI bearish, a break lower here will be firmly bearish, putting the focus on 15473.83 next.
