Hey Trader,
Week one done. Weak jobs data, gold up 3%, S&P at all-time highs. That was the setup. Now comes the real test - CPI Tuesday, PPI Wednesday. Here's what to watch.
Last Week in Brief Markets kicked off 2026 with a mix of optimism and caution. The S&P 500 edged to a record 6,966.28, the Dow hit 49,504.07, and the Nasdaq showed resilience despite mid-week volatility - closing at 25,766.26.
The weak December jobs report (just 50K added) shifted Fed expectations and fuelled rate cut bets. Unemployment fell to 4.4%. Gold rebounded over 3% to around $4,470-$4,490 on safe-haven demand. HSBC is now eyeing $5,000 in the first half of 2026 amid structural drivers including global debt levels and central bank buying.
The question heading into this week:
is the early rally sustainable, or are we due a pullback?
What Markets Are Watching This Week
1. US Macro Data: Inflation and Producer Prices Consumer Price Index (CPI) - Tuesday The December CPI release is the centrepiece of the week and will influence Fed expectations, real rates, currency and commodities pricing. Markets will parse headline and core inflation for signs of persistent price pressures.
Producer Price Index (PPI) - Wednesday PPI will provide a wholesale-level view of price pressures that often leads CPI movements. Watching the direction of PPI can help traders anticipate shifts in inflation momentum. These inflation datapoints, coming on the heels of last week's surprisingly weak payrolls, will be critical for Fed policy pricing and yields.
2. Fed Policy and Rate Expectations Although there's no scheduled Fed rate decision this week, market pricing for future rate cuts remains a key theme. Consensus still favours eventual cuts in 2026, though the exact timing and magnitude continue to be debated.
Expect selective Fed speakers to weigh in, reinforcing or moderating expectations. These comments can move bond yields, FX and growth assets even without official policy changes.
3. Equities: Earnings and Sector Rotation US equities closed last week at or near fresh highs after labour data showed modest job growth but improved unemployment, which tempered immediate rate-cut expectations.
This week may see continued rotation across sectors - with financials, tech and defensive names reacting differently to macro news. Earnings season is beginning and could introduce volatility if results surprise in either direction. Indices remain elevated on optimism, but positioning into earnings warrants attention.
4. Commodities: Gold and Dollar Dynamics
Gold Gold remains a focus as geopolitical risk and safe-haven positioning persist. Broader risk sentiment - including US engagements in Venezuela and general macro uncertainty - continues to support demand. Longer-term forecasts from major banks remain bullish even as short-term traders watch dollar strength and real rates.
US Dollar With CPI and inflation expectations potentially influencing real rates and policy pricing, the US dollar's directional bias will be sensitive to Tuesday's CPI.
Real yields and currency trends could therefore remain a swing factor for gold and other commodity prices.
5. Other Global Macro Factors Outside the US, data from the UK, Europe, China and Australia will also be released and may impact global currency flows, risk sentiment and yield curves.
Ongoing geopolitical developments continue to underpin safe-haven flows and risk premiums, which can affect both commodity and FX markets.
Key themes this week: - Tuesday CPI outcomes - likely headline catalyst
- Wednesday PPI - wholesale inflation insight
- Fed commentary - interpretive pricing for future cuts
- Earnings season beginning - potential for sector volatility
- Equity sector rotation - risk appetite vs caution
- Gold vs USD relationship - yield and safety trade-offs
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