Important calendar events
The dollar surged last week, and the tar index skyrocketed to 108.0 on Friday, its highest value in two years, before slipping to 107.5 later on Friday. US treasury yields also strengthened, supporting the dollar, with the US 10-year bond yielding 4.41%.
The US Federal Reserve cut interest rates by 25 basis points in November to a target range of 4.50% to 4.75%. The Fed had already launched its easing cycle in September, with an aggressive 50-bp rate cut, signaling the end of its restrictive monetary policy. Fed Chair Jerome Powell has stated that the progress of disinflation is steady, and the labor market is strong, permitting a shift towards a more neutral monetary policy.
Rate cut expectations have been fluctuating in the past couple of weeks due to ambiguous Fedspeak. FOMC members seem to be divided on the rate cut outlook, with some policymakers delivering hawkish speeches and others adopting a more dovish stance. Market odds of future rate cuts reflect this divergence in policymakers’ opinions, with odds of a December rate cut hovering near 55%.
Fed’s John Williams stated on Thursday that he expects inflation to cool, leading to further rate cuts. FOMC member Susan Collins, adopted a similar stance on Wednesday, stating that more interest rate cuts are needed, but at the same time stressing that caution is needed. Fed’s Austan Goolsbee on the other hand, said on Thursday that the central bank may need to slow down the pace of rate cuts.
FOMC policymaker Michelle Bowman warned markets on Wednesday that progress on disinflation seems to have stalled. Bowman stated that even though she supported November’s rate cut, she is in favor of keeping interest rates high long-term and hinted that the Fed may be already close to normalizing its monetary policy. Fed’s Lisa Cook was also hawkish in her speech on Wednesday, suggesting that the central bank may have to pause rate cuts if progress on disinflation remains slow.
The dollar has been supported by increased safe-haven demand as the crisis in Russia escalates. Tensions between Russia and Ukraine flared and safe-haven demand rose since US President Joe Biden green-lighted Ukraine’s use of US-bought missiles against Russia. These long-range missiles can reach deep into Russian territory and Biden’s decision is causing the crisis in Ukraine to escalate rapidly. Ukraine has already launched the first missiles into Russian territory and Russia has reprised by launching intercontinental ballistic missiles in a strike on the Ukrainian city of Dnipro.
More importantly, reports that Russian President Vladimir Putin updated Russia's nuclear doctrine boosted safe-haven demand last week. Dmitry Peskov, Press Secretary of the President of the Russian Federation, said on Tuesday that Russia might use nuclear weapons if it was subject to a conventional missile assault supported by a nuclear power. The Russian Government’s message came as a response to Biden’s approval of the use of US missiles by Ukraine against Russia. Peskov also threatened that Biden’s approval of the use of missiles by Ukraine could lead to a third world war. The UK has also permitted Ukraine to use British-made Storm Shadow missiles on Russian territory. This has led to an alarming escalation of the crisis, as the Russian Ambassador for the UK, Andrey Kelin, threatened that the UK was now a legitimate target for Russian missiles.
On the data front, US business activity data on Friday surpassed expectations propelling the dollar to two-year highs. The Flash Services PMI index rose to 57.0 in November from 55.0 in October against expectations of 55.2. A print above the threshold of 50.0 denotes sector growth and November’s rising print indicates that the US Service sector is expanding at an increasing pace. Flash Manufacturing PMI data showed that the US Manufacturing sector remained in contractionary territory in November, with a print of 48.8 which was in line with expectations. October’s value, however, was revised upward to 48.5.
US labor data released on Thursday were more optimistic than expected, boosting the dollar. US Jobless claims dropped to 213K for the week ending November 15, from 219K the week before and against 220K anticipated. The Philadelphia Fed Manufacturing Index, on the other hand, dropped to contractionary territory in November with a print of -5.5, down from 10.3 in October and against 7.4 anticipated.
Persistent price pressures may prevent the Federal Reserve from pivoting to a less restrictive monetary policy. US inflation is proving to be sticky despite the Federal Reserve’s efforts to bring it down to its 2.0% target. Headline inflation rose to 2.6% year-on-year in October from 2.4% in September. Monthly CPI rose by 0.2% for the fourth consecutive month in October, which was in line with expectations. Annual Core CPI, which excludes food and energy, rose by 3.3% in October and monthly core CPI rose by 0.3%, as predicted by markets in both cases.
The US economy expanded by only 2.8% in the third quarter of 2024, after rising by 3.0% in the second quarter of the year and by 1.4% in the first quarter of the year, while markets were anticipating 3.0% growth in the third quarter of 2024. The US economy is suffering from prolonged tightening, raising recession concerns.
Important US fundamentals are scheduled to be released this coming week, which are likely to cause volatility in the price of the dollar. CB Consumer Confidence on Tuesday is a leading indicator of economic activity and health. The most highly anticipated data of the week are due on Wednesday. These include Preliminary GDP data for the third quarter of the year, which according to earlier estimates, are expected to show economic expansion by 2.8%. In addition, Core PCE Price Index data are due on Wednesday. This is the Federal Reserve’s preferred inflation gauge and is expected to show that US Core PCE inflation rose by 0.3% in October. The minutes of the Fed’s meeting in November will also be released on Wednesday and will likely provide valuable insight into the Fed’s rate outlook.
EUR/USD remained in a downtrend last week, dropping from 1.047 to 1.035, its lowest level in two years. If the EUR/USD pair declines, it may find support at 1.022, while resistance may be encountered near 1.093.
The ECB lowered its benchmark interest rate by 25 basis points in October, bringing its main refinancing rate to 3.40%. The ECB started its easing cycle in June, lowering interest rates by 25bps for the third time this year in October.
ECB President Christine Lagarde has not committed to future rate cuts. Lagarde stressed that economic activity in the Eurozone is slowing down, prompting the ECB to lower interest rates. She also stated that policymakers are confident that inflation will drop to the central bank’s 2% target in 2025 but stressed that there are both upside and downside risks to inflation.
EUR/USD dipped on Wednesday as hawkish Fedspeak boosted the dollar, and, at the same time, dovish ECB rhetoric put pressure on the Euro. ECB officials last week expressed concerns on the EU economic outlook. ECB policymaker Fabio Panetta stressed that inflation in the Euro Area is close to the central bank’s target and emphasized the need for economic growth. ECB’s Francois Villeroy echoed this sentiment on Thursday, stating that the central bank’s inflation goal is in sight and that the ECB should continue to ease its restrictive policy.
On the data front, Manufacturing and Services PMI data on Friday showed that Eurozone business activity contracted in November. The EU Manufacturing sector continued to contract, as the PMI index dropped further into contractionary territory in November, with a print of 45.2 against estimates of 46.0. In addition, Eurozone Service PMI fell into contractionary territory in September, with a print of 49.2, below the threshold of 50.0 which denotes industry expansion and against expectations of 51.6. Weak economic data are raising the odds that the ECB will reduce interest rates further in December to boost the weakening Eurozone economy.
Flash GDP data showed that the Eurozone economy expanded by 0.4% in Q3 of 2024, rising from 0.2% in Q2. The Eurozone economy also expanded by 0.3% in the first quarter of 2024. The economic outlook of the EU remains fragile as prolonged tightening has brought the Euro area economy to the brink of recession.
Inflationary pressures in the Eurozone are not cooling as fast as expected. Eurozone inflation rose to 2.0% year-on-year in October from 1.7% in September, against expectations of 1.9%. Core CPI, which excludes food and energy, also came in higher than anticipated, remaining steady at 2.7% in October, against expectations of a 2.6% print.
GBP/USD extended losses last week, dropping from 1.263 to 1.252 as the dollar gained strength. If the GBP/USD rate goes up, it may encounter resistance at 1.304, while support may be found near 1.250.
At the latest BOE policy meeting, MPC members voted with a strong majority of 8-1 to cut rates to 4.75%. Bank of England Governor Andrew Bailey stated that the central bank intends to adopt a gradual approach to cutting interest rates. This would give policymakers time to assess the impact of the Government’s new budget on inflation.
The British Monetary Policy Report Hearings were released on Tuesday causing volatility in the price of the Sterling. BOE Governor Andrew Bailey testified on inflation and the economic outlook before the Parliament's Treasury Committee on Tuesday. Testifying about the MPC’s decision to lower interest rates at November’s policy meeting, Bailey stated that disinflation in the UK is progressing at a faster pace than anticipated, which allowed the central bank to cut interest rates. Bailey also stressed, however, that Services inflation is still above a level that's compatible with on-target inflation and that a gradual approach to policy normalization is required. Bailey’s remarks were perceived by markets as hawkish and the Sterling declined as BOE rate cut expectations in December dropped.
Economic activity data released last week for the UK showed that British business activity is slowing down. The British Manufacturing sector fell into contractionary territory in November, with a PMI print of 48.6 against expectations of 50.0. Flash Services PMI dropped to 50.0 in November, which marks the boundary between contraction and expansion, but which was considerably lower than the print of 51.9 anticipated. British Retail Sales contracted by 0.7% in October against expectations of a more modest decline by 0.3%. Retail Sales grew by 2.4% year-on-year in October, falling short of expectations of 3.4% growth.
In addition, British inflation data came in hotter than anticipated on Wednesday, squashing rate cut expectations in December. UK CPI data released on Wednesday showed an uptick in British inflation in October, which may prevent the BOE from cutting interest rates further. Headline inflation in the UK rose to 2.3% year-on-year in October from 1.7% in September, surpassing expectations of 2.2%. Core annual inflation, which excludes food and energy, climbed to 3.2% in October from 3.2% in September against 3.1% anticipated.
GDP data showed that the British economy contracted by 0.1% % in September, falling short of expectations of 0.2% expansion. In addition, Preliminary GDP data for the third quarter of the year showed that the British economy expanded by just 0.1% against expectations of 0.2% expansion. In addition, GDP data for the second quarter of 2024 were revised downward to reflect 0.5% growth against initial estimates of 0.6%.
USD/JPY exhibited high volatility last week, fluctuating around the 154.5 level. If the USD/JPY pair declines, it may find support at 151.2. If the pair climbs, it may find resistance at 156.8.
The USD/JPY rate traded above the key 155.0 level early last week, raising intervention concerns. USD/JPY dipped below the 155.0 level on Thursday, however, as traders realized their gains on rising concerns of a government intervention in support of the Yen. In addition, strong inflation data for Japan and rising expectations of a BOJ rate hike in December, boosted the Yen last week.
CPI Inflation data for Japan came in hotter-than-expected on Friday, raising the odds of a BOJ rate hike in December. Headline inflation in Japan rose by 2.3% year-on-year in October against expectations of a 2.2% print.
Japanese officials issued strong warnings last week against excessive short-selling of the Yen. Japanese Finance Minister Katsunobu Kato reiterated his former statement that the government is prepared to respond appropriately to sharp currency movements. Bank of Japan Governor Kazuo Ueda said on Thursday the central bank would seriously consider foreign exchange rate moves in its economic outlook.
The BOJ maintained its current monetary policy guidelines steady and its interest rate at 0.25% at its latest policy meeting. The BOJ had pivoted to a more hawkish policy at its meeting in July, raising interest rates by 15 basis points, the BOJ’s largest rate hike since 2007. The BOJ had already hiked interest rates once more in March, ending its negative interest rate policy.
BOJ Governor Kazuo Ueda’s forward guidance was hawkish. Ueda hinted at another rate hike in the following months, if economic and inflationary conditions are met. Ueda emphasized, however, that the BOJ’s policy will be data-driven and stated that the central bank will scrutinize data before each policy meeting.
Ueda delivered another hawkish speech on Monday, boosting the Yen. Ueda said that keeping interest rates low for too long could cause inflation to spike uncontrollably, forcing the BOJ to raise interest rates aggressively. Ueda, however, did not provide a specific timeline for rate hikes and markets doubted that the central bank could raise interest rates soon, causing the Yen to deflate.
Japan’s economy expanded by 0.2% in the third quarter of the year, down from 0.7% in the second quarter. The Japanese economy has started to expand, after shrinking by 0.5% in the first quarter of the year.
Gold prices rallied last week, rising from $2,566 per ounce to $2,715 per ounce. If gold prices rise, they may encounter resistance at $2,790 per ounce, while if gold prices decline, support may be encountered near $2,540 per ounce.
Gold prices skyrocketed to an all-time high of $2,700 per ounce earlier this month, but had been moving in overbought territory, and collapsed after the announcement of Donald Trump’s victory in the US Presidential elections. The effects of Trump’s victory on markets are starting to fade this week, however, and gold prices are starting to rally.
Heightened geopolitical tensions raised the appeal of safe-haven assets last week, outweighing the dollar’s strength. Demand for safe-haven assets is rising as the crisis between Russia and Ukraine escalates and threatens to expand in other countries as well. Tensions between Russia and Ukraine flared, and safe-haven demand rose since US President Joe Biden green-lighted Ukraine’s use of US-bought missiles against Russia. These long-range missiles can reach deep into Russian territory and Biden’s decision is causing the crisis in Ukraine to escalate rapidly. Ukraine has already launched the first missiles into Russian territory and Russia has reprised by launching intercontinental ballistic missiles in a strike on the Ukrainian city of Dnipro.
More importantly, reports that Russian President Vladimir Putin updated Russia's nuclear doctrine boosted safe-haven demand last week. Dmitry Peskov, Press Secretary of the President of the Russian Federation, said on Tuesday that Russia might use nuclear weapons if it was subject to a conventional missile assault supported by a nuclear power. The Russian Government’s message came as a response to Biden’s approval of the use of US missiles by Ukraine against Russia. Peskov also threatened that Biden’s approval of the use of missiles by Ukraine could lead to a third world war. The UK has also permitted Ukraine to use British-made Storm Shadow missiles on Russian territory. This has led to an alarming escalation of the crisis, as the Russian Ambassador for the UK, Andrey Kelin, threatened that the UK was now a legitimate target for Russian missiles.
The crisis in the Middle East has also been boosting demand for safe-haven assets, keeping gold prices high. The conflict in the Middle East, however, has been raging for over a year and markets are starting to ignore this risk, lowering the appeal of safe-haven assets.
In addition, a slump in stock markets on Thursday turned safe-haven demand towards gold. Nvidia released its Q3 earnings on Thursday, which were underwhelming, causing its stock to plummet by 3.0% following the release, putting pressure on gold stock markets and driving investors to safe-haven assets.
Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar surged last week, and the index skyrocketed to 108.0 on Friday, its highest value in two years. US treasury yields also strengthened, supporting the dollar, with the US 10-year bond yielding 4.41%. Gold prices extended gain this week, however, as increased safe-haven demand outweighed the dollar’s rally.
The US Federal Reserve cut interest rates by 25 basis points last week to a target range of 4.50% to 4.75%. The Fed had already launched its easing cycle in September, with an aggressive 50-bp rate cut, signaling the end of its restrictive monetary policy. Gold prices are supported by expectations of further Fed rate cuts.
Rate cut expectations have been fluctuating in the past couple of weeks due to ambiguous Fedspeak. FOMC members seem to be divided on the rate cut outlook, with some policymakers delivering hawkish speeches, while others are adopting a more dovish stance. Market odds of future rate cuts are reflecting this divergence in policymakers’ opinions, with odds of a December rate cut hovering near 55%.
Oil prices rallied last week and WTI price rose from $66.9 to $71.5 per barrel. If oil prices retreat, they may encounter support near $66.9 per barrel, while resistance may be found near $73.1 per barrel.
Oil prices rallied last week as geopolitical concerns overshadowed an increase in US stockpiles. Tensions between Russia and Ukraine flared, causing oil prices to spike. Both Russia and Ukraine have been targeting each other’s energy infrastructure repeatedly. Recent attacks against Russia’s energy infrastructure have caused three Russian oil refineries to suspend or reduce operations, raising concerns that energy supplies from Russia might be interrupted.
US President Joe Biden green-lighted Ukraine’s use of US-bought missiles against Russia, causing the crisis in Ukraine to escalate rapidly. Ukraine has already launched the first missiles into Russian territory and Russia has reprised by launching intercontinental ballistic missiles in a strike on the Ukrainian city of Dnipro.
More importantly, reports that Russian President Vladimir Putin updated Russia's nuclear doctrine boosted oil prices last week. Dmitry Peskov, Press Secretary of the President of the Russian Federation, said on Tuesday that Russia might use nuclear weapons if it was subject to a conventional missile assault supported by a nuclear power. The Russian Government’s message came as a response to Biden’s approval of the use of US missiles by Ukraine against Russia. Peskov also threatened that Biden’s approval of the use of missiles by Ukraine could lead to a third world war. The UK has also permitted Ukraine to use British-made Storm Shadow missiles on Russian territory. This has led to an alarming escalation of the crisis, as the Russian Ambassador for the UK, Andrey Kelin, threatened that the UK was now a legitimate target for Russian missiles.
US crude oil inventories released on Wednesday showed a surprise build in US crude stockpiles, putting pressure on oil prices. The US Energy Information Administration reported that weekly crude stocks rose by 0.5M barrels for the week to November 8th, against an expected draw of 0.1M barrels and following a 2.1M barrels build the week before.
Concerns of a broadening conflict in the Middle East have also boosted oil prices in the past year. The conflict in the Middle East, however, has been raging for over a year without significantly affecting oil supply and distribution, and markets are starting to ignore this risk.
Oil prices are kept in check by high central banks’ interest rates. Rate cut expectations have been fluctuating in the past couple of weeks due to ambiguous Fedspeak. FOMC members seem to be divided on the rate cut outlook, with some policymakers delivering hawkish speeches, while others are adopting a more dovish stance. Market odds of future rate cuts are reflecting this divergence in policymakers’ opinions, with odds of a December rate cut hovering near 55%.
Bitcoin price surged last week, reaching $99,500 on Friday for the first time in history and flirting with the $100,000 milestone. Bitcoin’s rally was halted over the weekend, however, on rising risk aversion sentiment and Bitcoin price dropped below $97,000. If the BTC price declines, support can be found at $85,000, while resistance may be encountered at the psychological level of $95,000.
Ethereum price also surged last week, jumping from $3,070 to $3,370 on Thursday and touching $3,450 over the weekend. If Ethereum's price declines, it may encounter support near $3,000, while if it increases, resistance may be encountered near $3,500.
Bitcoin has been riding the Trump trade in the past couple of weeks, surging to all-time highs. Bitcoin has more than doubled its value this year, gaining over 130% year-to-date and is flirting with the $100,000 milestone. Bitcoin is attracting investors’ attention, at both institutional and retail levels. Institutional demand for Bitcoin continues to rise, with companies such as MicroStrategy investing large sums in the cryptocurrency. In addition, inflows of the spot Bitcoin exchange-traded funds (ETFs) have been record-breaking in the past couple of weeks, fuelling demand for the cryptocurrency.
The announcement of the departure of Chair for US Securities and Exchange Commission Gary Gensler on Thursday boosted cryptocurrencies as Gensler’s strict enforcement stance has been criticized by the crypto industry.
Crypto markets have been gaining strength since Donald Trump’s victory in the US Presidential elections. Trump’s proposed tariffs and tax policies will support economic growth, boosting high-risk assets, such as cryptocurrencies. In addition, Trump has openly declared his support of crypto markets, announcing that he will make the US ‘the crypto capital of the planet’. Growing expectations that the new government will adopt a pro-crypto regulatory and fiscal policy have been boosting crypto markets, especially since Donald Trump announced plans to accumulate a national Bitcoin stockpile.
Geopolitical concerns are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. Risk sentiment dropped last week, as tensions between Russia and Ukraine flared. US President Joe Biden green-lighted Ukraine’s use of US-bought missiles against Russia, causing the crisis in Ukraine to escalate rapidly. Ukraine has already launched the first missiles into Russian territory and Russia has reprised by launching intercontinental ballistic missiles in a strike on the Ukrainian city of Dnipro.
More importantly, reports that Russian President Vladimir Putin updated Russia's nuclear doctrine put pressure on risk assets last week. Dmitry Peskov, Press Secretary of the President of the Russian Federation, said on Tuesday that Russia might use nuclear weapons if it was subject to a conventional missile assault supported by a nuclear power. The Russian Government’s message came as a response to Biden’s approval of the use of US missiles by Ukraine against Russia. Peskov also threatened that Biden’s approval of the use of missiles by Ukraine could lead to a third world war. The UK has also permitted Ukraine to use British-made Storm Shadow missiles on Russian territory. This has led to an alarming escalation of the crisis, as the Russian Ambassador for the UK, Andrey Kelin, threatened that the UK was now a legitimate target for Russian missiles. The conflict between Israel and Hamas is also putting pressure on risk assets. The conflict in the Middle East, however, has been raging for over a year and markets are starting to ignore this risk.
Cryptocurrency prices are also affected by central banks’ interest rates. High interest rates are restricting economic growth, putting pressure on risk assets, while the promise of rate cuts boosts crypto markets. Rate cut expectations have been fluctuating in the past couple of weeks due to ambiguous Fedspeak. FOMC members seem to be divided on the rate cut outlook, with some policymakers delivering hawkish speeches, while others are adopting a more dovish stance. Market odds of future rate cuts are reflecting this divergence in policymakers’ opinions, with odds of a December rate cut hovering near 55%.
BTC/USD 1h Chart
ETH/USD 1h Chart
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Written by:
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