Financial markets faced challenges this week due to sharply rising government bond yields and ongoing uncertainty in energy markets, which negatively impacted investor sentiment. The upcoming week is expected to be significant, with several central bank decisions and a busy macroeconomic calendar, particularly focusing on data from the U.S., China, and Australia. The markets anticipated to experience the most volatility include AUD/USD, DE40 (DAX futures), and gold.
The AUD/USD currency pair is expected to be in focus next week, primarily due to the Reserve Bank of Australia's (RBA) interest rate decision scheduled for Tuesday. The market consensus anticipates a rate hike to 4.60%. Additionally, Wednesday's Chinese PMI data will be crucial, as China is a significant destination for Australian commodity exports. A hawkish tone from the RBA could support the AUD after its recent decline, particularly as it tests the 0.70 level.
The German DAX has been attempting to limit losses, but rising bond yields in Germany pose a significant challenge. The 10-year Bund yield has reached 3.6%, the highest since 2009, which has hindered recovery efforts. Next week, the outlook for European equities will be influenced by a busy macroeconomic calendar, including preliminary German CPI data on Wednesday and final manufacturing PMI readings for Germany and the euro area on Thursday. Speeches from ECB officials will also provide context. Strong preliminary PMI readings could support regional equity indices, although investors will remain cautious due to high energy prices.
Gold prices have fallen below $4,300 per ounce, but the market has not extended losses significantly below recent local lows. The upcoming week will test gold prices with several key U.S. macroeconomic releases. Investors will be particularly focused on Tuesday’s JOLTS report, Wednesday’s PCE inflation data and GDP reading, Thursday’s ISM manufacturing index, and Friday’s U.S. nonfarm payrolls report. Recent strong labor-market data has supported the Fed's latest rate hike. If these figures are revised lower, recent market movements could be reversed. Conversely, strong labor-market data could reinforce expectations for tighter monetary policy, putting additional downward pressure on gold prices.