US dollar, Nasdaq 100, Gold forward returns over Easter: The Week Ahead

We have a shorter trading week due to the long Easter weekend. As there is a lack of top-tier data, we take at how the US dollar index, Nasdaq 100 and gold have performed around this time of year.

The week that was:
The week ahead (calendar):
The week ahead (key events and themes):

The week that was:

The Fed held their interest rate as widely predicted, yet the dot plot came as a surprise as it still backs three 25bp cuts this year (despite upgrading core PCE inflation for 2024 and maintaining it at 2.2% for 2025)
This saw US bonds surge to weigh on yields and the US dollar, and bolster appetite for risk; the Dow Jones, S&P 500 and gold reached record highs,
The BOJ hiked interest to finally ditch negative interest rates for the first time in eight years, although the broadly weaker yen suggests the move was fully priced in and more was expected
RBA meeting dropped their slightly hawkish bias from their statement, which send AUD pairs broadly lower on renewed hope of a cut (although I remain doubtful one will arrive soon)
Yet the combination of the dovish FOMC meeting and strong Australian employment figures quickly s bears cover their dovish-RBA bets
Canada’s inflation figures once again came in softer than expected, which bolstered bets for the BOC to cut their interest rate in July

The week ahead (calendar):

Next week’s calendar seems to lack top-tier economic events, and as it is the Eater weekend we may find volatility to be on the lower side. Still, a few things are worth mentioning in case they lead to new developments.

The week ahead (key events and themes):

The week ahead (key themes and events):

Shorter trading week due to Easter weekend
Australian CPI, retail sales
BOJ summary of opinions, Tokyo CPI
US GDP

Australian CPI, retail sales

With traders desperately trying to price in an RBA cut this year, the attention shifts to Australia’s monthly CPI report and retail sales. The RBA still think that inflation remains “too high”, so any soft figures here could bolster bets of easing. Retail sales is likely second tier data at best, but if we’re treated to lower consumer prices alongside soft retail sales, conviction if a cut likely grows. With that said, I very much doubt the RBA have the appetite to cut any times soon unless data really does come in soft.

Trader’s watchlist: AUD/USD, NZD/USD, AUD/NZD, NZD/JPY, AUD/JPY, ASX 200

BOJ summary of opinions, Tokyo CPI

As the BOJ have only just got around to ditching negative rate after eight years, it seems highly unlikely next week’s data could move the needle to warrant further action any time soon. Still, the BOJ’s summary of opinions could shed some light just over how harmonious the decision was, and the odds of others dissenting in future.

Tokyo CPI shot higher in February, so another hot print could prompt some speculation of another hike. But like the RBA, I doubt the BOJ will move any time soon so, in all likelihood, it will be another BOJ nothing burger.

Trader’s watchlist: USD/JPY, AUD/JPY, GBP/JPY, EUR/JPY, Nikkei 225

Forward analysis of markets around the Easter holidays:

Using data since 1993, I have crunched the numbers to see how certain markets perform the four days prior to Easter Friday, and the three days after Easter Monday. This provides 30 years of data which is considered the minimum amount of data points for a data set to be deemed “statistically significant”.

As markets are closed on Easter Friday, the average and median returns represent the Monday to Thursday ahead of Easter Friday.

Nasdaq 100 forward returns:

The Nasdaq 100 has averaged positive returns between Monday to Thursday ahead of Easter Friday
Monday has averaged the strongest returns of 0.68%, although the median is just 0.06% (which shows a few large prints have skewed the average higher)
Thursday is the second highest average return of 0.56%, and the highest median return of 0.37%
The average high-low % range is just below 2%, although again we see a few large prints have increased the average
Four of the past six years have produced high-low % ranges of 2% or greater to show a pickup of volatility ahead of the long Easter weekend

Gold forward returns:

Conversely, gold has average negative returns in the four days leading up to Easter Friday.
Interestingly, Tuesday delivered the strongest average and median returns of -0.29% and -0.38%
The Tuesday following Eater has seen gold deliver the strongest average returns of 0.16%, although median returns the following Thursday are 0.17%

US dollar index forward returns:

The US dollar index has averaged the strongest returns on Monday of 0.21%, with a median of 0.16%
Tuesday has a slightly higher median return of 0.162%, but the pattern seems to be one of diminishing bullish returns as we approach easter
The fact gold also has negative average returns suggests investors may be moving to cash as opposed to moving to safe havens

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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