Dow Jones, USD/JPY, BTC/USD, China Crypto Crackdown, Evergrande

The Dow Jones, S&P 500 and Nasdaq 100 wrapped up a rosy week, rising about 0.75%, 0.64% and 0.14% respectively. This is considering that all 3 Wall Street benchmark stock indices erased prominent downside gaps at the beginning of the week. Most regional stock indices in Europe also finished higher, with Asia-Pacific markets falling slightly behind.

Evergrande contagion woes were brushed aside as the highly indebted company made an onshore coupon payment. Offshore bondholders reportedly did not receive payments by the end of the trading week. The situation remains fluid as China told local governments to prepare for a default. The risk is that a growth slowdown in the world’s second-largest economy reverberates outwards.

Markets seemed to focus more on the Federal Reserve as Chair Jerome Powell hinted at completing asset purchase tapering by the middle of next year. The 10-year Treasury yield rallied to its highest since early March amid the central bank’s rosy outlook on the economy. A rise in front-end bond yields sent the US Dollar outperforming against the Japanese Yen. Anti-fiat gold prices weakened.

The Canadian Dollar also performed well, perhaps supported by improving market sentiment as crude oil prices continued recovering. Oil is a key Canadian export, thus having potentially consequential impacts on inflation and monetary policy. Meanwhile, Bitcoin suffered as China declared all cryptocurrency transactions illegal, extending crackdowns on parts of the economy.

There will be a plethora of central bank speeches in the week ahead. The most notable will come from Capitol Hill, where both Fed Chair Jerome Powell and Treasury Secretary Janet Yellen will testify before Congress. Given rising inflationary pressures, policymakers may focus their attention on that front, perhaps reveling further insight into the central bank’s view on the topic.

Fed presidents from the New York, Atlanta and St. Louis branches will also be speaking for US Dollar traders. ECB President Christine Lagarde and BoE Governor Andrew Bailey are also on tap for those watching EUR/USD and GBP/USD respectively. The next round of US PCE data is due later in the week, which is the Fed’s preferred gauge of inflation. This could meaningfully impact monetary policy bets. What else is in store for markets in the week ahead?

US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD

Fundamental Forecasts:

US Dollar Post-FOMC Performance Hinges on Slew of US Data

The update to the US Consumer Price Index (CPI) is likely to sway the US Dollar during the Federal Reserve’s blackout period as the central bank braces for a transitory rise in inflation.

S&P 500 & FTSE 100 Forecasts for the Week Ahead

Short-term uncertainties to keep the pressure on equity markets.

Australian Dollar Outlook: China, Energy and Yields in Play. What Will Drive AUD/USD?

The Australian Dollar continues to be caught in the crosswinds of external factors as risk appetite fluctuates. Can AUD/USD find firmer…