The upcoming week is set to be a busy one for financial markets, with major events such as key central bank meetings in the UK and US, important data releases including eurozone inflation and US NFP, and the US Treasury quarterly refunding announcement. The week also marks the release of Big Tech earnings, contributing to a low cross-market volatility that favors the carry trade.

However, the case for moving out of high-yielding dollars is not particularly compelling at this time. The dollar has demonstrated strength across the G10 and emerging market currency blocs, largely due to the resilient US growth. This has alleviated the pressure for immediate rate cuts by the Federal Reserve. Additionally, global investment opportunities present a less convincing case, with the eurozone likely to confirm its technical recession based on the fourth quarter GDP data for 2023, and investor confidence in China remaining subdued.

One of the key focal points for FX markets this week is the FOMC meeting, where the Federal Reserve is anticipated to counter the dovish narrative. Despite the challenging task of convincing financial markets, the Fed is expected to push back against the prevailing dovish sentiment.

Key Events in the US

The week ahead in the US encompasses several significant developments. Firstly, the Wednesday FOMC meeting is anticipated to provide insights into the Federal Reserve’s stance on the current economic landscape. The expectation is for the Fed to resist the prevailing dovish narrative, despite the skepticism from financial markets.

Another pivotal event is the US Treasury’s Quarterly Refunding announcement on Wednesday. The focus here is on the US Treasury’s ability to manage the issuance of longer-end bonds without triggering adverse effects such as elevated US Treasury yields and weakened equities.

Furthermore, the week will see the release of quarterly earnings from four major tech companies, with Tuesday and Thursday marking the respective announcement days. These earnings reports are expected to have a notable impact on market sentiment and performance.

As the week draws to a close, the focus shifts to Hungary, which is set to be a prominent topic at the EU summit. The National Bank of Hungary’s decision to cut rates is expected to garner attention, contributing to the broader discussions within the European Union.