Important calendar events
The dollar dipped last week, and the dollar index dropped from 106.9 to 105.7. US treasury yields also declined, putting pressure on the dollar, with the US 10-year bond yield falling from 4.41% to 4.17%.
Forex markets exhibited high volatility early last week but were quiet towards the end of the week. Most currency pairs exhibited thin trading volumes on Thanksgiving Thursday and Black Friday.
President-elect Donald Trump communicated more tariff measures on his social media on Tuesday, causing increased volatility in Forex markets. Trump stated that his administration would impose an additional 25% tariff on imports from Canada and Mexico, with an extra 10% to the 60% already announced during his election campaign on Chinese goods.
News that President-elect Donald Trump has nominated hedge fund manager Scott Bessent for US Treasury Secretary put pressure on the dollar last week. Bessent is known for his cautious stance, and he is considered a safe choice to take over from Janet Yellen as the next US Treasury Secretary. Bessent’s appointment is considered by markets as likely to promote economic growth, which is lowering the demand for safe-haven assets and putting pressure on the dollar.
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.
The minutes of the Fed’s November meeting were released on Tuesday and were indicative of the divergence in FOMC members’ opinions. According to the minutes, policymakers expressed different opinions on the Fed’s rate outlook during the latest meeting. Some officials were in favor of pausing rate cuts and maintaining interest rates at restrictive levels if inflation remained high. Other policymakers argued in favor of further rate cuts to boost the US economy and labor market.
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.
Core PCE Price Index data released on Wednesday confirmed that price pressures in the US remain high. Core PCE Price Index is the Federal Reserve’s preferred inflation gauge and influences the central bank’s policy outlook. US Core PCE inflation rose by 0.3% in October up from 0.2% in September. Annual Core PCE Price Index rose to 2.8% in October from 2.6% in September, indicating that disinflation in the US is stalling. Core PCE Price Index data released on Wednesday are likely to deter the Fed from cutting interest rates in December. Wednesday’s inflation data, however, were within market expectations and their effect had already been priced in. Market odds of a December rate cut rose to approximately 70% last week putting pressure on the dollar.
Preliminary GDP data for the third quarter of the year released on Wednesday were in line with previous estimates. 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.
US Unemployment Claims released on Wednesday dropped slightly to 213K for the week ending November 22 from 215K the week before. Durable Goods Orders rose by 0.2% in October, falling short of expectations of 0.4% growth but exceeding September’s reading of 0.7% contraction.
CB Consumer Confidence, which is a leading indicator of economic activity and health, rose in November according to data released on Tuesday. The CB index rose to 111.7 in November from 109.6 in October, which was in line with expectations. On the other hand, the sales of new homes in the US dropped to 610K in October from 738K in September, indicating declining economic growth.
This coming week we have a barrage of economic data that are likely to affect the dollar. Manufacturing PMI data on Monday are likely to show that the US manufacturing sector continues to contract, although analysts predict that the manufacturing sector improved in November. The most important data coming up this week is the US labor data, starting with JOLTS job openings on Tuesday. ADP Non-Farm Employment Change on Wednesday is expected to show that fewer new jobs opened in November, indicating that the US labor market is weakening. Non-farm payrolls, or NFPS on Friday are this week’s most highly anticipated fundamentals and are likely to cause volatility in the price of the dollar. Friday’s data are expected to show significant improvement in NFPs in November compared to October’s reading. If market estimates come true, the dollar is likely to gain strength.
EUR/USD edged higher last week, rising from 1.047 to 1.057 as the dollar weakened. If the EUR/USD pair declines, it may find support at 1.033, while resistance may be encountered near 1.093.
The Euro held its ground against the dollar last week as markets showed relief that the EU has so far been exempt from Donald Trump’s proposed import tariffs to the US. During his presidential campaign, Trump had threatened that the EU would pay a big price for not buying enough exports from America. After the announcement of Trump’s proposed tariffs on Tuesday, German economy minister Robert Habeck said the EU must enter negotiations with the US to avert a potential trade war.
Political instability in France is putting pressure on the Euro. France’s government is struggling to pass its budget, with Prime Minister, Michel Barnier negotiating with far-right National Rally leader Marine Le Pen. The budget talks continued into the weekend, but the two parties have not reached an agreement yet. Uncertainty over France’s budget will likely cause volatility in the Euro this coming week, as Barnier has warned that if the French parliament does not support the budget bill, the French government could fall.
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. A 25-basis point rate cut in December, however, is already priced in, with some analysts predicting an even sharper 50-bp rate cut in December.
ECB members’ speeches last week varied, indicating that policymakers are not in agreement over the central bank’s policy outlook. ECB member Isabel Schnabel delivered a hawkish speech on Wednesday, stating that she was against pivoting to a more accommodating monetary policy and advised caution in cutting interest rates further. On the other hand, ECB’s Francois Villeroy de Galhau said on Thursday that the central bank should keep its options open for a sharper rate cut in December.
On the data front, Eurozone inflation remains above the ECB’s 2% target and may prevent the ECB from cutting interest rates in December. Eurozone inflation rose to 2.3% year-on-year in November from 2.0% in October, which was in line with expectations. Core CPI, which excludes food and energy, remained steady at 2.7% in November, against expectations of a 2.8% print.
Inflation data for Germany on Thursday showed that disinflation is progressing in the Euro Area’s leading economy. Preliminary CPI data showed that monthly inflation contracted by 0.2% in November, which was in line with expectations. In addition, headline inflation in Germany rose by 2.2% year-on-year against expectations of 2.3% growth.
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.
The Sterling benefitted from the rivaling dollar’s decline last week and GBP/USD rose from 1.259 to 1.273. 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.
BOE’s Clare Lombardelli stated on Monday that satisfactory progress on disinflation has been made and that she supports a gradual removal of monetary policy restrictions Lombardelli reiterated on Wednesday that the BOE should be cautious in moving ahead with rate cuts. Lombardelli also warned that Trump's proposed tariffs would pose a risk to economic growth in the UK.
The BOE delivered its biannual Bank Stress Test report on Friday. According to the report, investors are expressing concerns about the sustainability of rising government debt, which may cause volatility in financial markets. The stress tests, however, showed that the British banking system remains robust and could survive a severe global economic downturn.
BOE Governor Andrew Bailey delivered a press conference about the Financial Stability Report on Friday. Bailey stressed that there is no trade-off between financial stability and economic growth. Bailey’s comments came after new finance minister Rachel Reeves hinted that regulators are avoiding taking risks.
In addition, British inflation data came in hotter than anticipated last week, squashing rate cut expectations in December. UK CPI data 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%.
The Yen rallied last week, and, at the same time, the dollar dipped, causing the USD/JPY rate to plummet from 154.2 to 149.6. If the USD/JPY pair declines, it may find support at 148.4. If the pair climbs, it may find resistance at 156.7.
Inflation data for Japan came in hotter-than-expected last week, raising the odds of a BOJ rate hike in December, and providing support for the Yen. Tokyo Core CPI data on Friday showed an uptick in Japan’s inflation in November. Tokyo Core CPI came in at 2.3% annually in November, beating expectations of 2.0% and far exceeding October’s print of 1.8%. In addition, Headline inflation in Japan rose by 2.3% year-on-year in October against expectations of a 2.2% print according to CPI data released on Wednesday.
Services Producer Price Index data released on Tuesday for Japan also exceeded expectations. SPPI is a leading indicator of consumer inflation since producers’ prices are passed down to consumers. SPPI rose to 2.9% annually in October against expectations of 2.5% growth. In addition, September’s print was revised upward to 2.8% from initial estimates of 2.6%. BOJ Core CPI data, however, which were also released on Tuesday, showed a drop in Japan’s inflation. BOJ Core CPI dropped to 1.5% year-on-year in October from 1.7% in September against expectations of 1.8%.
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.
The BOJ will likely pivot to a more restrictive monetary policy by the end of the year or at the beginning of 2025, which will provide some much-needed support for the Yen. At the same time, the US is easing interest rates, moving towards a less restrictive monetary policy, which is slowing down the USD/JPY’s ascent.
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 dipped last week, dropping from $2,720 to $2,650 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 $2,535 per ounce.
Geopolitical tensions cooled early last week, leading to a drop in safe-haven demand. A 60-day ceasefire between Israel and Lebanon was officially declared on Wednesday. The deal will hopefully lead to discussions of a peace treaty and put an end to the 14-month conflict and has the potential to restore stability in the Middle East. However, reports of the ceasefire deal had already led to overselling of gold earlier in the week, putting pressure on gold prices.
Geopolitical tensions were rekindled towards the end of the week, however, raising demand for safe-haven assets. Reports that Israel broke the ceasefire deal on Friday, boosted gold prices. In addition, Russian President Vladimir Putin stated that Russia may use its new nuclear-capable missiles against Ukraine in response to Ukraine’s using long-range missiles to attack Russian territories.
The US Federal Reserve cut interest rates by 25 basis points in November to a target range of 4.50% to 4.75%. Gold prices are supported by expectations of further Fed rate cuts. Market odds of a December rate cut rose to approximately 70% last week, boosting gold prices.
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 dipped last week, and the dollar index dropped from 106.9 to 105.7. US treasury yields also declined, putting pressure on the dollar, with the US 10-year bond yield falling from 4.41% to 4.17%.
The announcement that President-elect Donald Trump has chosen hedge fund manager Scott Bessent as the new US Secretary of the Treasury put pressure on gold prices last week. Bessent is known for his cautious stance, and he is considered a safe choice to take over from Janet Yellen as the next US Treasury Secretary, which is lowering the demand for safe-haven assets.
Concerns over Trump’s proposed tariffs, however, raised safe-haven demand on Tuesday, boosting gold prices. President-elect Donald Trump communicated more tariff measures on his social media. Trump stated that his administration would impose an additional 25% tariff on imports from Canada and Mexico, with an extra 10% to the 60% already announced during his election campaign on Chinese goods.
Oil prices dipped last week and WTI price dropped from $71.4 to $68.3 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.
Markets last week were focusing on the OPEC+ Output Policy meeting, which had been scheduled for Sunday, December 1st. The organization’s meeting was postponed, however, to Thursday, December 5th. OPEC’s December meeting holds special interest, as the organization is expected to announce its output plans for the year ahead on December 5th and markets anticipate an extension of OPEC’s oil production cuts into 2025. Comments from members of the OPEC+ consortium ahead of the meeting are likely to cause volatility in oil prices.
US crude oil inventories released on Wednesday showed an unexpected drop in US crude stockpiles, boosting oil prices. The US Energy Information Administration reported a weekly crude stockpile draw of 1.8M barrels for the week to November 22, against expectations of a 1.3M barrel draw and following a rise of 0.5M barrels the week before.
Concerns of a broadening conflict in the Middle East have boosted oil prices in the past year. Geopolitical tensions cooled early last week. A 60-day ceasefire between Israel and Lebanon was officially declared on Wednesday. Geopolitical tensions were rekindled towards the end of the week, however. Reports that Israel broke the ceasefire deal on Friday, boosted oil prices. In addition, Russian President Vladimir Putin stated that Russia may use its new nuclear-capable missiles against Ukraine in response to Ukraine’s using long-range missiles to attack Russian territories.
Oil prices are kept in check by high central banks’ interest rates. Market odds of a December rate cut rose to approximately 70% last week, boosting oil prices.
Bitcoin price was volatile last week, dropping from $98,900 to $90,700 earlier in the week, but rallying towards the end of the week and rising to $97,300 over the weekend. If the BTC price declines, support can be found at $86,000, while resistance may be encountered at the psychological level of $100,000.
Ethereum price gained strength last week, rising from $3,320 to $3,700. If Ethereum's price declines, it may encounter support near $3,000, while if it increases, resistance may be encountered near $3,800.
Bitcoin has been flirting with the key $100,000 level in the past two weeks. Bitcoin price slumped early last week, however, as many traders rushed to realize their gains. After a rough start to the week, Bitcoin rallied again on Wednesday, ending the week above the $97,000 level. Bitcoin price is on track again to reach $100,000 and many analysts predict it will reach this milestone this week.
Geopolitical concerns are promoting a risk aversion sentiment, lowering the appeal of high-risk assets such as cryptocurrencies. Geopolitical tensions cooled on Wednesday, however, leading to a rise in risk sentiment. A 60-day ceasefire between Israel and Lebanon was officially declared on Wednesday. The deal will hopefully lead to discussions of a peace treaty and the deal will hopefully put an end to the 14-month conflict and has the potential to restore stability in the Middle East. Geopolitical tensions were rekindled towards the end of the week, however, on reports that Israel broke the ceasefire deal.
Crypto markets have been gaining strength since Donald Trump’s victory in the US Presidential elections. 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. In addition, Trump’s proposed tariffs and tax policies are expected to support economic growth, boosting high-risk assets, such as cryptocurrencies.
Concerns over Trump’s proposed tariffs, however, dampened risk sentiment last week. President-elect Donald Trump communicated more tariff measures on his social media. Trump stated that his administration would impose an additional 25% tariff on imports from Canada and Mexico, with an extra 10% to the 60% already announced during his election campaign on Chinese goods.
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. Market odds of a December rate cut rose to approximately 70% last week, providing support for cryptocurrencies.
ETH/USD 1h Chart
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Written by:
Myrsini Giannouli
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