The last weeks of 2023 are coming for the market. Last week, the head of the US Federal Reserve, Jerome Powell, said that the historic tightening of monetary policy was most likely over, and the discussion of a rate cut was coming to the fore. In the coming week, investors will receive the next data on inflation in the United States for this year. The Bank of Japan may be approaching a long-awaited policy reversal. All the most interesting things are in our top.
Investors will receive further information about inflation in the United States this year after the release of the spending report on Friday.
Economists expect the PCE price index to remain unchanged for the second month in a row in November, while the benchmark, which excludes volatile food and energy costs, will rise by 0.2%.
Data on consumer confidence, initial applications for unemployment benefits and orders for durable goods will also be presented. Data on the housing sector will include reports on sales of new and ready-made housing.
On Friday, the Dow Jones industrial average reached another record high. The S&P 500 index changed, registering its seventh consecutive week of gains, which was the longest weekly series of gains since 2017.
After the head of the Federal Reserve Bank of New York, John Williams, said on Friday that it was too early to talk about a rate cut, optimism among investors weakened.
"I think we realized this week that (Fed Chairman Jerome Powell) doesn't want to punish the economy too much by raising the rate for no good reason," Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh, told Reuters.
"I do not know if we will have what is called a "Santa Claus rally," but it seems that, all other things being equal, the market may rise higher."
Expectations are growing that the Bank of Japan may end its negative interest rate policy in the coming months. The attention of the US Federal Reserve and other major central banks is focused on when to start cutting rates.
It is unlikely that changes will occur at the Bank of Japan meeting, but investors will carefully study the bank's rate statement in search of any signs that a reversal may occur at the next meeting in January.
The expected reversal, as well as the Fed's "dovish" attitude, led to the yen returning to 141 per dollar for the first time since July.
Last week, the head of the Bank of Japan, Kazuo Ueda, said that the central bank will face an even more difficult situation at the end of this year and in early 2024, which has stirred up the market.
Gold is on track for its first annual growth since 2020, helped by a weakening dollar and growing expectations of a rate cut in 2024.
A reduction in the interest rate increases the attractiveness of storing bullion with zero yield.
The real yield on U.S. 10-year bonds has been rising nonstop since the beginning of 2022, but it was only in June that it turned positive, pushing gold back from near record levels. It is now at its highest level in the last 8 years, but this has not prevented gold from rising above $2,000 per ounce. However, its price is still 20% below its 1980 historical high of over $2,500, adjusted for inflation.
Investors are counting on a flurry of rate cuts next year, while political and economic uncertainty is growing — potentially heralding a favorable moment for gold investors.
UK inflation is currently more than 2 times the Bank of England's 2% target, and the latest data on Wednesday is likely to confirm that price pressures remain elevated compared to other major economies.
This month, the pound hit a three-month high against the euro after a sharp decline in inflation in the eurozone, which fueled speculation that the Bank of England will cut rates longer than the European Central Bank.
However, a high rate could also lead the UK economy into recession. The fate of the pound depends on whether the Bank of England continues to respond to current inflation trends or adopts a longer-term view that economic weakness will lead to lower wages and prices.
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