This week started with a miss in the US CPI data setting hopes for a dovish Fed meeting on Wednesday. However, on Wednesday the Fed’s dot plot projections showed the Fed remains committed to getting on top of US inflation and that a higher rate above 5% may be ahead for 2023. This sent the USD higher, gold lower, and stocks lower. On Thursday the Bank of England’s decision was mixed with a dovish vote split of 7-2, but the BoE no longer sees the current money market pricing as too aggressive, which was more hawkish.
Other key events from the past week
USD: US CPI drops, Dec 13: Headline US inflation came in at 7.1% y/y below the 7.3% forecast and minimum expectations of 7.2%. This sent the S&P500 higher, USD/JPY lower, and precious metals higher before the Fed meeting.
USD: Interest Rate decision, Dec 14: The rate statement took a hawkish outlook with the dot plot median rate for 2023 seen as 5.1% and no rate cuts projected until 2024. However, the bond market did not react in a way that it showed agreement with the Fed’s outlook. A bumpy road ahead for stocks!
GBP: Bank of England, Dec 15: The Bank of England’s decision was mixed with a dovish vote split, but a growing acceptance of the market’s pricing for a 4.50% terminal rate next summer. The hawkish Fed decision may help keep the GBPUSD pressured in the near term, but the inflation battle is far from won.
Key events for the coming week
USD: Consumer confidence, Dec 21: US consumer confidence is forecast by economists to fall to 100 next week down from 100.2 prior. Watch for any big dips in consumer confidence, 98 or below, to potentially weaken US stocks.
Strong Gold seasonals ahead: Gold’s seasonals are great this time of year.
USD: Inflation focus, Dec 23: The last core PCE print came in firm at 5%. Will we start to see PCE, the Fed’s preferred measure of inflation, fall more dramatically? Expect the path of inflation to continue to impact how aggressive the Fed will need to be on its rate path next year.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
AUD/USD struggles near multi-month low; looks to US CPI for fresh impetus
AUD/USD languishes near a multi-month low during the Asian session on Wednesday and seems vulnerable amid a bullish USD. Expectations that inflationary import tariffs from US President-elect Donald Trump will push up prices and limit the scope for the Fed to cut rates remain supportive of elevated US bond yields.
USD/JPY sits near its highest level since July, close to 155.00 as traders await US CPI
USD/JPY stands firm near its highest level since July 30 amid speculations that a fragile minority government in Japan will make it difficult for the BoJ to tighten its monetary policy further. Moreover, fears that US President-elect Donald Trump might again hit Japan with protectionist trade measures continue to undermine the JPY.
Gold price oscillates around $2,600, just above a nearly two-month low ahead of US inflation
Gold price consolidates its recent heavy losses to the lowest level since September 20 as bears opt to pause for a breather ahead of the crucial US CPI report, which will influence Fed rate-cut expectations and provide a fresh impetus.
Ripple could rally 50% following renewed investor interest
Ripple's XRP rallied nearly 20% on Tuesday, defying the correction seen in Bitcoin and Ethereum as investors seem to be flocking toward the remittance-based token. XRP could rally nearly 50% if it sustains a firm close above the neckline resistance of an inverted head and shoulders pattern.
Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out Premium
What a week – the US election lived up to their hype, at least when it comes to market volatility. There is no time to rest, with politics, geopolitics, and economic data promising more volatility ahead.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.