Dubai: There is no question that 2023 has been vibrant so far. Stocks and commodities traders were quick to rejoice at the news that China had reopened its economy in early January. Geopolitical tensions have receded somewhat, but are now being replaced by concerns about contagion and central bank pivots. FOREX.com’s experienced analysts monitor market trends daily and produce insightful reports detailing forecasts for the second quarter of the year. Here is a summary.
Oil and Gold: outlook remains bullish
WTI was between $70 and $83 for most of the first quarter. However, the recent market turmoil surrounding the collapse of the Silicon Valley Bank (SVB) has pushed oil prices to a 15-month low. Oil’s upside potential is now tempered by slowing growth and high inflation, while downside potential is tempered by OPEC’s willingness to push prices into the $60s. Demand and supply dynamics, especially the resumption of economic activity in China, continue to support demand. The central bank may eventually cut interest rates, which could push WTI into his $90+ range.
On gold, FOREX.com analysts remain bullish on commodities in Q2, but confirm that things are not simple. Headline risk remains a major driver of gold, and for now has become more of a trader’s market than an investor’s market. Gold’s inverted relationship with bond yields and the US dollar is as strong as concerns over the Silicon Valley bank catastrophe and contagion unfolded. However, if risk appetite improves and central banks remain tough, gold could recapture its recent rally. Central banks, China and India are expected to continue to support gold, while the futures curve remains in contango, indicating that prices may rise. In a nutshell, upside risks for gold include safe-haven flows, easing inflation, and lower interest rates, while downside risks include a risk-on environment, rising inflation, and rising interest rates. included.
FOREX: USD HAS SEEN BETTER DAYS
FOREX.com analysts remain bearish on the dollar overall as the market appears to believe the Fed will be less aggressive than expected. However, a further acceleration in inflation may be needed for the dollar to regain buying power against rivals in the second quarter. However, contractionary Fed rate hikes could hurt the housing market, cause job cuts in the tech sector, increase unemployment, bring the economy to a halt, and lead to rate cuts. Another threat to the US dollar is the collapse of the debt ceiling as funding is secured until the end of the second quarter.
The dollar is therefore likely to remain under pressure in the short term, and we expect the EUR and GBP to outperform. Therefore, FOREX.com analysts expect a return to 1.1000 for EUR/USD and 1.2500 for GBP/USD.
A return to a strong dollar will require a fundamental change that triggers a breakout of key resistance between the 104.63 to 105.80 area of the Dollar Index. This could happen if the US economy continues to outperform or if financial markets continue a period of risk. – Off environment.
Indicators: Are things improving?
In the US, interest rate hikes are starting to slow down. The Nasdaq has outperformed the Dow Jones so far and may continue to do so in the next quarter. Buyers expect him to rise above 13,200 and climb to 13,725 in the short term, while sellers expect him to break below his 11,000-year trendline support.
In the euro area, inflation is expected to ease slowly, especially as Germany’s main trading partner China continues to recover, and the economy looks more resilient than expected. However, risks remain. The banking sector remains in the spotlight following the collapse of SVB and the acquisition of Credit Suisse by UBS. The DAX’s long-term rally is losing momentum. If the seller falls below $14,000 and he falls below $13,700, the next step is likely. Buyers, on the other hand, need to go above 16,000 to create higher highs.
As in Europe, the UK recession points to a return to growth in activity as of March 2023, which is expected to be less severe than initially feared. Hiking is enabled. We expect the BoE to delay rate hikes this quarter and possibly start cutting rates around the turn of the year. However, this is not enough to regain the full confidence of traders.
FTSE may find support from miners, but heavily weighted bank stocks may remain under pressure in the short term. Multinationals, which make up more than 80% of his FTSE 100, are also less likely, given FOREX.com analysts have been somewhat bullish on his GBP/USD throughout the year. You may be pressured by unfavorable exchange rates. Going forward, FTSE could struggle to beat his all-time high above 8,000.
Macroeconomics: A good start does not mean a positive outlook
The first two months of 2023 paint a picture of optimism about the global economic outlook, with the IMF’s World Economic Outlook highlighting that the worst-case scenario has been avoided. In its first-quarter update, the IMF forecasts global growth of 2.8% this year, with strong growth projected for Asia and Africa, while soaring interest rates, bank concerns and war in the eurozone. growth (0.8%). ) and the United States (1.6%). Inflation appears to have peaked across developed economies, as FOREX.com analysts predicted throughout their 2023 Market Outlook report. The normalization of supply chains, market adaptations to the ongoing Russian-Ukrainian war, and rapidly rising interest rates so far appear to have started a disinflationary process. We broadly agree that it is too late to affect underlying economic activity, not to mention early signs of stress in developed market banking systems.
Big Tech: Do all tech giants perform the same?
Following the release of recent quarterly earnings reports by some of the largest publicly traded big tech companies, including Alphabet, Microsoft, Meta, Amazon and Apple, Wall Street expects an even tougher quarter for big tech earnings. According to Bloomberg consensus figures, Microsoft is the only member to report EPS growth (+0.7% year-on-year) after declining in the last two quarters, while the rest of the group It is expected to report another quarterly decline. , specifically the meta-diluted EPS forecast (YoY) is -26.8%, with Apple at -6.3% and Amazon at -3.4%.
Given that these five giants together make up almost 43% of the index, the Nasdaq 100 remains the index to watch this big tech earnings season. All big tech stocks have posted significant gains since the start of 2023 (through the end of April 18), with the Nasdaq 100 up more than 20% of his. Still, there are notable divergences when it comes to valuations, according to Bloomberg data. Meta trades at a discount to the wider market in terms of its blended futures price-to-earnings ratio (BF PE ratio), with Alphabet underperforming while Microsoft and Apple look to give the market a premium valuation. Inspiring, Amazon stands out as it. We continue to prioritize growth over profitability.
According to Ritu Singh, Regional Director of FOREX.com: “The current quarter is a cautionary tale and the outlook for all markets is to put all eggs in one basket and encourage traders to diversify their portfolios to avoid taking big risks in one market. It may again indicate that there may be a need.” she added: “FOREX.com offers a wide range of financial instruments including forex, cryptocurrencies, indices, stocks, commodities and precious metals to meet the tastes and expectations of different traders. Our team is always ready to help traders make informed decisions based on the latest market analysis, and extended opening hours for key U.S. stocks will allow them to We will make it available for trading as soon as you reveal your gender. ”
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