Markets enter Tension-Mode – Markets Weekly Outlook

• Discover our Weekly Market Outlook, exploring themes and events that forged financial flows throughout the week.
• This week was forged by volatility amid growing political and geopolitical pressures.
• Get ready for next week's action by exploring upcoming events across global Markets.

The week opened on a nasty surprise:

Donald Trump attempted another attack on Jerome Powell, starting an investigation through the Department of Justice against the Federal Reserve Chair.

Jerome Powell quickly responded in an unusual address (for an unusual issue), published on Sunday evening.

Fortunately, the effect was not long-lasting for the Stock Markets, as reactions to defend the Head of the Central Bank were widespread, spanning from bankers around the world to Republican officials lifting shields against attacks that were going too far.

This naturally led to a massive rebound before the CPI data (after a prior drop in the overnight futures session) – And the Market was proven right.

• First, it seems this investigation will not go very far, given the Senate's heavy backing of the Fed Chair.
• Second, the CPI, which followed on Tuesday, did not surprise to the upside and even led to a positive surprise on the Year-over-year Core CPI measure (at 2.6% ~ still high but far from scary.)
• Third, the event might provide even more reasons for Jerome Powell to remain at the Fed as Governor after his term (as Chair) expires in May.

His term as Governor could extend for two more years, and with the resilience he has shown amid these attacks, it wouldn't be surprising to see him stand as an independent voice in an ever-more politicized Federal Reserve.

The issue is that other elements that had been looming over Markets since the end of December have disrupted the positive sentiment.

Revolts in Iran are continuing, and as the President pledged to fight injustices around the world, he threatened the Regime to intervene, which added further investor angst.

There is an estimated and very tragic +12,000 casualties from brutal repressions from the IRGC and Basij forces.

Oil added a substantial premium, reflecting a larger risk premium, rising 10% from the past week to $62.

Stock Indexes, on the other hand, suffered strong drops but rallied back as the President called off the intervention, saying "the killing has stopped" in Iran.

Oil also corrected back sharply to the low $59 – A risk premium remains in the Market, albeit not a huge one (I invite you to discover why with our in-depth Oil Analysis).

With the U.S.S. Abraham Lincoln, a massive American warship heading to the Middle East, this story could not be entirely over. So keep a close eye on these developments throughout next week.

You can see how volatile this week was, particularly on Wednesday as intervention fears peaked.

The surprising winners here were Cryptocurrencies which had been waiting for catalysts to rise again after staying dormant for couple months.

Silver also reached some new all-time highs to $96! And despite its fall in today's session, concludes the week up 9%. But this is not surprising anymore.

Keep an eye on weakness in the Metals market as the trade reaches a key inflexion point.

For the rest, you can see how confused Investors are for traditional assets, closing the week largely unchanged for the most part (even Oil after a tumultuous week).

Discover More:

• Stocks trade in uncertain territories – Dow Jones and US Stock Index Outlook
• Why is the US Dollar so strong to start 2026? EUR/USD and Dollar Index overview
• Chart Alert: Japanese yen short squeeze risk,158.15 key USD/JPY trigger

After a massive Chinese Trade Data release, beating their record exports (to $1.2T) despite US tariffs, Investors will be watching closely for the Chinese GDP data, where yearly measures will be published. The release is planned for Sunday evening.

This will also be followed by the PBoC Rate Decision on Monday.

Antipodean releases will also add more complexity to next week's action (as US data is largely absent).

For Australia, traders will await the Inflation Gauge data, Employment Data, and PMIs from Sunday to Thursday.

New Zealand will release key Business Performance data on Monday, followed by its own CPI data on Thursday afternoon.

But the most significant event for APAC trading will surely be the Bank of Japan Rate Decision on Thursday Evening (between 19:00 and 21:00, with no fixed release time per tradition).

No hike is expected for this meeting (Currently about 2 more hikes priced in for the year) – But harsh communications are awaited to defend the Yen as the BoJ gets increasingly frustrated from Inflation coming from their weakening currency.

Failing to communicate would surely rub salt in the wound.

Of course, keep an option for a surprise hike.

This week will see some high-tier economic events, starting on Monday with the Davos World Economic Forum, where Central Bank heads, Presidents and Bankers exchange opinions on a yearly basis.

• Expect tons of Central Bank speeches.

The UK will finally release their Employment Data on the Monday-to-Tuesday night trading (at 2:00 A.M).

The Unemployment Rate is expected to correct to 5% with unofficial forecasts for a -25K release.

*I mistakenly said the UK Jobs data was supposed to be released this week in our past week Weekly Outlook. Pardon me for that if you may.

For the Eurozone, expect CPI data on Monday at 5:00 A.M, PPI data for Germany, and many PMI figures on Thursday.

The week will be much thinner for North American Markets, concentrated around the end of the week.

The exception will be for Canada which releases their Inflation data on Monday (8:30 A.M) which could either cement odds of a 2026 hike or push them away.

If you just look at expectations, that hike won't go too far – The consensus for the Headline data is at -0.4%!

Except for the Weekly ADP Employment report, there won't be much until Thursday.

American data will release GDP data expected to remain very high (4.3% annualized), combined with the Core PCE release at 10:00 A.M. the same day.

Friday should also be packed for NA Traders, with Canadian Retail Sales, Global PMI data and Michigan Consumer Sentiment spanning the entire morning session.

The Fed also enters its pre-FOMC Blackout Period (The meeting is on January 28, no rate cuts expected).

Finally, keep your notifications on for the geopolitical scene: Iran developments should continue to impact Oil and Global markets.

Safe Trades and enjoy your weekend!

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