Asian stocks were mixed on Tuesday due to the absence of indices from Wall Street after a holiday in the United States. But European and U.S. equity futures are flashing red amid a jump in Treasury yields, as investors brace for the Federal Reserve to raise interest rates four times this year to rein in the inflation. Brent crude ventured to its highest level since 2014 on geopolitical tensions in the Middle East, while gold struggled for direction above $1810. In currencies, the king dollar pushed higher while the yen weakened this morning after the Bank of Japan concluded a two-day policy meeting with no major changes.

This is sure to be a big week for financial markets as investors juggle the various themes influencing global sentiment. Stock markets will look to corporate earnings for some direction as the fourth-quarter earnings season heats up. Reports from U.S. banks that have so far reported paint a mixed picture with JP Morgan Chase, a financial indicator, closing more than 6% on Friday after the bank said rising costs would squeeze profits in 2022 even as t posted a record full-year earnings. Heavyweights such as Goldman Sachs and Bank of America, as well as Netflix among many others will be in the spotlight this week.

The burning question in investors’ minds might be what impact rising inflation and the emergence of the Omicron variant will have on earnings last quarter. If we see another week of mixed or disappointing results, it could further undermine the confidence of stock bulls, especially considering that the broader S&P500 index is already down more than 2% so far. This year.

A wild week ahead for the pound?

The pound could be injected with volatility this week due to the series of key economic reports and the potential political drama in Westminster.

Market expectations already remain elevated for the Bank of England’s interest rate hike next month, with traders predicting a roughly 91% chance of a 25 basis point rate hike. The case for higher rates could be strengthened this week if pending data meets or exceeds forecasts.

On the political front, Prime Minister Boris Johnson remains under pressure to resign over “partygate”. Considering how it has been reported that as many as 30 no-confidence letters to Boris Johnson have been submitted by Tory MPs, things are bound to get heated. A total of 54 letters of censure would have to be submitted to Sir Graham Brady, chairman of the 1922 committee of backbenchers, for a vote to take place.

From a technical standpoint, the GBPUSD remains bullish on the daily charts. However, there appears to be resistance around the 200-day simple moving average at 1.3734. A drop towards 1.3600 could be in sight after such a strong run from the December lows, before the bulls regain momentum for a push towards 1.3700 and 1.3830.

Commodities Spotlight – Oil

Brent crude entered Tuesday’s session, with prices surging to new seven-year highs as geopolitical tensions boiled over in the Middle East. Iran-backed Yemini fighters claimed to have launched drone strikes on the United Arab Emirates, OPEC’s third-largest producer. Brent is up almost 2% this week and has appreciated almost 13% since the start of 2022. Prices are above $87.70 this morning, with bulls targeting $88 and $90 as targets of increase.

Commodities Spotlight – Gold

Gold could be thrown into the firing line this week if the dollar regains its mojo and Treasury yields rally. The precious metal has shown resilience over the past few sessions and even took advantage of a weaker dollar to rally above $1810.

However, given the zero-return nature of gold, the road ahead could be bumpy and perilous for the precious metal as rising interest rates become a reality. Although other factors such as inflation risks and Omicron uncertainty may support gold’s bugs, pressure is building on gold.

From a technical perspective, prices remain in a choppy range. A break below $1810 could open the doors towards $1800, 1786 and $1770. If $1,810 proves to be reliable support, the bulls could target $1,831 and $1,845.