Market Week Ahead: Gold Reclaims $2,000, GBP/USD, EUR/USD Recover as USD Falls
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The Fed stands firm, expects three rate cuts in 2024, gold prices rise while yields fall
According to the Fed's latest dot plot, the Federal Reserve will make a series of interest rate cuts next week, with three 25 basis point rate cuts expected in 2024, as the US central bank acknowledges that economic growth is likely to weaken in the future . However, financial markets are pricing in a more aggressive series of rate cuts, with six moves of 25 basis points expected next, with the first cut expected in late March.
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In contrast to the Fed's dovish stance, both the Bank of England and the European Central Bank maintained their hawkish outlook, despite earlier expectations that both could gently exit their ongoing hawkish stance. Expectations of a series of interest rate cuts by both central banks next year have been pushed back but still point to significantly lower interest rates in 2024.
Restrictive BoE leaves interest rates unchanged – GBP/USD breaks above 1.2700
The ECB is keeping interest rates stable with cautious downgrades in inflation. EUR/USD is rising
Stock markets continue to ride the wave of optimism, with US indices hitting multi-year and all-time highs, while in Europe the DAX hit a new all-time high. Positive risk sentiment continues to drive the bull market in equity markets, but as we enter the final week before the Christmas/New Year break, volume is falling significantly and risk appetite is likely to weaken.
There are some key economic data releases on the calendar next week, with inflation reports from the UK and US as well as policy from the Bank of Japan standing out.
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Technical and fundamental forecasts – until December 18th
British Pound Watches Inflation and GDP Data – GBP/USD and EUR/GBP Forecasts
The Bank of England reiterated this week that its battle against inflation is far from over, leaving sterling supported by expectations of higher interest rates in the longer term.
Euro Forecast: EUR/GBP and EUR/JPY face support, EUR/USD rises?
A more restrictive statement from the ECB is likely to be somewhere between the BoE and the dovish Fed and will support the euro. What is likely to influence Euro pairs next week?
Gold (XAU/USD) and silver (XAG/USD) are rising on the Fed's dovish interest rate outlook
Gold and silver turned their initial losses into respectable gains at the end of the week, driven by a dovish outlook from the Federal Reserve for the year ahead.
US Dollar at Risk with Core PCE on Deck, Setups for EUR/USD, GBP/USD, USD/JPY
The November US PCE report will be crucial for the US dollar in the short term. Weaker-than-expected numbers could reinforce the dollar's recent decline, but strong numbers could trigger a bullish reversal.
All articles are written by DailyFX analysts and strategists