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FOREX.com Markets’ Forecasts for 2023

What Kind of Opportunities in a World in Crisis?

2022 was turbulent to say the least, causing many unexpected turns of events in global financial markets, and leaving traders and investors perplexed. Will Cryptoasset value rise again? Is Gold still a safe haven? How about currencies; will the USD retain its hegemony despite an inevitable recession? How about Oil prices in a tensed global context? What trends for Forex and Big Tech?

In an attempt to shed more light on possible scenarios for 2023, a seasoned team of analysts at FOREX.com are giving a general financial outlook of the coming months, allowing stakeholders and market players to set baseline expectations for the market trends and themes to monitor, with focus on 6 main areas: Macroeconomics, Forex, Indices, Big Tech, Commodities and Cryptoasset.

Recession is Coming

From a Macroeconomic perspective, the global economy is expected to further slow down in 2023. Although the pandemic itself has rather subsided, its effects still weigh heavily on many countries which are struggling to recover. Europe, the UK, and to a lesser extent, the U.S., are all vulnerable to falling into recession in the coming year, while growth is likely to be more robust in emerging and developing Asia. Gloomy scenarios are expected if inflation stays stubbornly stuck in the 5% range, despite rising interest rates, – or worse – increases beyond the 5% mark, confirming International Monetary Fund forecast that “the worst is yet to come”.

Keep an Eye on Geopolitics

In terms of Commodities, one thing is sure: as long as there’s high demand and low supply, prices will remain up. Inflation could provide a tailwind to Commodity prices, provided demand continues to outstrip supply. More importantly, FOREX.com analysts are tightly linking Commodity prices to geopolitics, especially after 2022, where a mixture of supply chain bottlenecks, war and demand-driven inflation created ripples across financial markets. Today, Oil prices are caught between fears of a global slowdown, a raging conflict between superpowers, and OPEC’s desire for higher prices. However, Oil is more likely to close higher in 2023 than lower. With China reopening and OPEC’s support, FOREX.com experts estimate the commodity price to range between $60 – $110 this year.

On another note, central banks, China and India are expected to continue providing support for Gold in 2023, and the metal could outperform if consumer prices deflate. Yet, with the Fed likely to go above 5% interest rates and hold them there, central banks will be forced to tighten their way to a global meltdown, sending investors to cash their Gold stash. Accordingly, FOREX.com expects a ‘below average’, high-to-low range performance for Gold, pricing it at a range of $1600 – $1900 in 2023.

Anything is Possible in the Forex Market

Despite many speculations and a threatening recession, the U.S. Dollar was on an upward trajectory, for much of 2022, especially back in September, when the DXY trading stood at a 20-year high, sending currency pairs such as EUR/USD, GBP/USD, and AUD/USD to plunge to multi-decade lows, while sending USD/CAD and USD/JPY to multi-year highs. As it became more evident that inflation was just settling in, the Fed began hiking interest rates. According to the Summary of Economic Projections released at December’s FOMC meeting, the Fed intends to raise rates by a further 75bps, then maintain it at that level throughout 2023. The trajectory for the U.S. Dollar will depend on the Fed’s next move: raising interests would provoke a new hike in the first half of 2023, while a tightening policy in the second half could result in a downward trend.

A Year of Two Halves

For Global Indices, 2023 is likely to be equally, if not more, turbulent than 2022. Analysts expect the sharp central bank policy tightening to become less aggressive, before rate hikes are paused altogether and potentially reversed in the latter parts of the year. Inflation might remain sticky, and the global economic slump is likely to worsen, holding back consumer spending. Despite European indices experiencing a strong rally in Q4, it is doubtful whether the rise in stocks can continue. Given the expected central bank-induced recession early 2023, European indices could fall in the first half, before mounting a slow, drawn-out recovery in the second part of the year.

Rough Ride Ahead for Big Tech

Apple, Microsoft, Alphabet, Amazon and Meta saw more than $3 trillion wiped off their valuations in 2022 – the worst year for tech stocks since 2008. With inflation persistently high, rates continuing to rise and a recession around the corner, Big Tech are likely to suffer more losses in 2023. Earnings will remain under pressure in early 2023 and growth will be much harder to come by. However, the new year is expected to present an opportunity for investors, as Big Tech has the resources needed to weather the storm, especially if the macro environment improves. For Big Tech, stocks’ performance is a global game that involves Europe and China, as much as the U.S. For now, markets are buckling up for another rough ride over the next 12 months, but hopes remain that Big Tech stocks can put the worst behind them in 2023.

No Future for Crypto?

2022 was a black year for Cryptoasset investors, with the space shedding nearly $2 trillion in market capitalisation, as a deep ‘crypto winter’ set in and major assets like Bitcoin and Ethereum traded down by more than -80% from their peaks. Despite this disappointing performance, which has confused traders and stirred apocalyptic scenarios among observers regarding the crypto space viability, FOREX.com analysts believe that there’s still light at the end of the tunnel. Not only the depths of crypto winters have been the best times to buy historically, but there’s also new evidence suggesting that the worst of the ‘crypto winter’ is now behind. Key risks to watch through 2023 stem from the potential for more turmoil at key crypto institutions like Binance and Tether, as well as the reinforcement of more regulations which could hinder the adoption in the space.

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