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Weekly Market Preview
Friday, Nov 24, 2023
US dollar prices experienced a decline last week as the markets increasingly believe that US interest rates have reached their peak, and the Federal Reserve’s forthcoming move may involve a cut in rates over the upcoming year. This conviction solidified in response to October’s inflation levels and US job data. Gold prices tested the $2000/oz threshold and then slipped with decreased liquidity due to the US Thanksgiving holiday.
The euro and British pound values received a boost from the release of November’s purchasing managers’ data for the industrial and services sectors, surpassing expectations. Despite remaining below 50 (indicating contraction), the stronger-than-anticipated rebound suggests that the worst phase may be over, especially as most of the central bank officials favour maintaining interest rates unchanged at present.
Investor focus will now turn to key economic indicators, notably European inflation levels for November. Projections anticipate a monthly drop from 0.1% in October to (-0.2%) in November, indicating a decrease in the CPI headline YoY from 2.9% to 2.8%. Expectations also forecast a decline in core inflation from 4.2% to 3.9%. A lower-than-expected outcome, or even meeting these expectations, would reinforce the view that European interest rates have peaked, potentially paving the way for the European Central Bank to consider interest rate reductions in the first half of the next year. Additionally, investors will closely monitor Federal Reserve Chairman Jerome Powell’s speech, seeking any clues about the timeline for reducing US interest rates in 2024.
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