Holiday-thinned trading, a shortened week, and a light economic calendar point to abnormal price action in the last days of 2023. Will Santa’s rally continue? Will the US Dollar remain under pressure?
Here is what you need to know for next week:
The economic calendar is light next week. Adding to this, holiday-thinned trading could favor limited price action while at the same time encouraging false breakouts. Most trading platforms won’t be functional on Monday.
It was another positive week for equity prices. The Dow Jones reached all-time highs, while US Treasury yields moved lower. The 10-year settled around 3.90%, the lowest since July. Will Santa stay on Wall Street next week?
The US Dollar Index (DXY) lost ground for the second week in a row, falling to monthly lows, below 102.00. It continues to move with a bearish bias, on the back of risk appetite and lower yields. Market repricing expectations from the Federal Reserve (Fed) in 2024 keep the Greenback under pressure.
This week’s key number was the Core Personal Consumption Expenditure (Core PCE), which rose 0.2% in November, below the expected 0.3%, and 3.2% from a year ago. The headline index actually declined 0.1% in November, marking the first negative reading since 2020. The data adds to evidence that inflation is moving toward the Fed’s 2% target. Data from the US next week includes home prices (Tuesday), Jobless Claims (Thursday), and the Chicago PMI (Friday).
The EUR/USD rose above 1.1000, and next week’s challenge will be to remain above that area. The pair posted the highest weekly close in five months. The crucial report will be Spain’s preliminary Consumer Price Index (CPI) for December on Friday.
The GBP/USD posted modest weekly gains, facing difficulty holding above 1.2700. Despite posting gains versus the US Dollar, the Pound was affected by UK inflation data, which came in softer than expected. EUR/GBP rose from 0.8575 to 0.8660, retaking the 20-week Simple Moving Average. No relevant data from the UK is due next week.
The Japanese Yen was the worst performer among majors during the week, following the Bank of Japan (BoJ) monetary policy meeting. USD/JPY posted minor gains; however, it finished far from the weekly peak around 142.50, showing that prevailing risks are to the downside. On Wednesday, BoJ will release the Summary of Opinion of the latest monetary policy meeting. Data due from the country includes retail trade data and industrial production. Japanese economic figures could start having more relevance considering the expectations about a potential exit from BoJ’s negative interest rate policy.
No relevant economic reports are due from Canada, Australia, and New Zealand. AUD/USD and NZD/USD posted important gains for the second week in a row and the highest close since July. Price action is expected to continue to be driven exclusively by USD dynamics.
Gold posted the second-highest weekly close on record. XAU/USD hovers around $2,050 and the trend is up. The main risk for the yellow metal could come from a repricing of Fed easing expectations. A rebound in US yields could trigger a sharp correction in Gold.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.