- Control of the US House and the Middle East will likely send market shockwaves.
- US inflation and retail sales data are set to show the ongoing health of the US economy.
- Fed Chair Powell will speak and may comment on recent developments.
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.
1) Control of the House matters for tax cuts
Donald Trump will return to the White House, and his Republican party clinched a clear majority in the Senate. However, votes in close races for the House of Representatives are still counted, and it is unclear if the Grand Old Party (GOP) will gain a majority there.
If a Republican sweep is confirmed, it will mean fresh tax cuts that benefit stocks and could mean more money sloshing around and chasing Gold.However, it would also imply higher interest rates, as the government's borrowing needs would rise. Elevated yields benefit the US Dollar (USD).
If Democrats claw onto the lower chamber, most of Trump's policy would be in tariffs – which markets dislike. It would be adverse for stocks and would weigh on Gold.
At the time of writing, Republicans have a better chance of winning the House.
2) Middle East cooldown or warmup?
Jared Kushner, President-elect Trump's son-in-law, served as an envoy to the Middle East in the previous administration. Kushner – a staunch supporter of Israel, is married to Ivanka Trump. The politician's other son-in-law is Michael Boulos, who married Tiffany Trump and is of Lebanese descent. Michal and his father, Massad Boulos, played a role in convincing some Arab Americans to vote for Trump.
Will these family connections help stabilize the Middle East? Hope boosts markets and weighs on the prices of Oil and Gold.
On the other hand, Qatar has recently suspended its mediating role between Israel and Hamas, accusing both sides of failing to negotiate in good faith. In addition, Iran has vowed revenge for Israel's attack on it in October. An escalation in the crisis would benefit commodities.
3) US inflation set to hold steady
Wednesday, 13:30 GMT. Close, but no cigar. US inflation has dropped significantly from its highs but has yet to hit 2%. The Consumer Price Index (CPI) report is the first release of hard inflation data, and it is set to show a small increase in headline prices, from 2.4% to 2.6% year-over-year (YoY) in October.
More importantly, core CPI – which excludes volatile food and energy prices – is projected to stick to the 3.3% recorded in September. The Federal Reserve (Fed) and investors watch this figure more closely, as underlying inflation impacts interest rate expectations.
US core CPI YoY. Source: FXStreet.
The monthly core CPI is the most market-moving figure, and a reading of 0.3% is on the cards. Weaker inflation would send US Treasury yields down, boosting Gold and stocks while weighing on the US Dollar. A hotter print would do the opposite.
4) Fed Chair Powell may comment on inflation
Thursday, 20:00 GMT. The biggest headlines from Fed Chair Jerome Powell's post-rate cut presser were related to politics – he said he would refuse to resign if the president asked him to. Powell was relatively tight-lipped on the economy, dodging any questions about the next move in December or the path in 2025.
In a panel discussion in Dallas, the Fed Chair may feel more relaxed to share fresh views, and he will have the chance to comment on the CPI report.
If Powell expresses worries about the labor market, it would weigh on stocks and the US Dollar while supporting Gold. Concerns about inflation would weigh on the precious metal and equities while buoying the currency. Stock investors need his confident message.
5) US Retail Sales will likely show shoppers on a roll before Black Friday
Friday, 13:30 GMT. Roughly two-thirds of the US economy is centered on consumption, making this report critical. Moreover, Fed Chair Jerome Powell highlighted this component as an engine of growth.
In the past few months, shoppers were on a roll. In September, the retail sales control group – which focuses on the most non-volatile items – shot up by 0.7%.
The economic calendar points to a moderate 0.3% expansion in headline sales in October, a tad below 0.4% recorded in the previous month. A better figure would add oomph to stocks and the US Dollar while weighing on Gold. A soft figure would do the opposite.
In the past few years, holiday season shopping – which begins with Black Friday – fell below estimates. A robust number now would provide a shield against relatively softer sales toward year-end.
Final thoughts
The election is over, but uncertainty about Trump's policies at home and abroad will likely remain high on the agenda before and also after his inauguration.
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.
Recommended Content
Editors’ Picks
AUD/USD traders seem non-committed around 0.6500 amid mixed cues
AUD/USD extends its consolidative price move just above 0.6500 on Friday. The RBA's hawkish and upbeat market mood supports the Aussie, though mixed Australian PMI prints fail to inspire bulls. Moreover, bets for a slower Fed rate-cut path continue to fuel the post-US election USD rally and cap the currency pair.
USD/JPY slides to 154.00 as higher Japanese CPI fuels BoJ rate-hike bets
USD/JPY languishes near 154.00 following the release of a slightly higher-than-expected Japan CPI print, which keeps the door open for more rate hikes by the BoJ. That said, the risk-on mood, along with elevated US bond yields, could act as a headwind for the lower-yielding JPY and limit losses for the pair amid a bullish USD, bolstered by expectations for a less dovish Fed and concerns that Trump's policies could reignite inflation.
Gold price advances to near two-week top on geopolitical risks
Gold price touched nearly a two-week high during the Asian session as the worsening Russia-Ukraine conflict benefited traditional safe-haven assets. The weekly uptrend seems unaffected by bets for less aggressive Fed policy easing, sustained USD buying and the prevalent risk-on environment
Ethereum Price Forecast: ETH open interest surge to all-time high after recent price rally
Ethereum (ETH) is trading near $3,350, experiencing an 10% increase on Thursday. This price surge is attributed to strong bullish sentiment among derivatives traders, driving its open interest above $20 billion for the first time.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
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.