The added good news here is that core annual inflation is seen easing further to 3.8%, down from 4.5% in November. However, headline annual inflation appears to be sticking around just above 3% after a brief dip below 2% in June.
This article was written by Justin Low at www.forexlive.com.
Xinhua news agency is reporting that the start date to the annual meeting will be on 5 March and this usually will go on for nearly two weeks. The sessions are used to discuss key legislative matters involving the economy and social issues, with voting for new laws also set to take place.
This article was written by Justin Low at www.forexlive.com.
Over the course of the year, UK house prices fell by 1.8% and that is arguably much less hurtful than anticipated considering the rate hikes by the BOE. The average price of a dwelling is seen at £257,443 to end the year. Nationwide does note that a rebound next year „appears unlikely“ though as they say that „consumer confidence remains weak and surveyors continue to report subdued levels of new buyer enquiries“.
This article was written by Justin Low at www.forexlive.com.
In the first week of December, it looked like gold was set for a bit of a reality check after the rally above $2,100 fizzled rather quickly. That saw price dip back below $2,000 but gold bugs have definitely salvaged the situation in a push to a record high close this week. Thinner liquidity conditions may still cast some doubts over the latest move higher but there are points to argue for gold to chase a further move higher heading into next year.
And the seasonal tailwind in January is arguably one of the strongest points there could be in advocating for an extension higher.
Amid lighter trading this week, gold is now at $2,077 and posted a record daily close in trading yesterday. It might be tough to look too much into the moves at the moment but there is definitely a feeling that gold bugs are getting a little too anxious in trying to drag the precious metal past the $2,100 mark and to new heights at this point.
The way I see it, gold is poised for one of two things now. It is either we go off to the races to start the new year i.e. fresh record highs, or we get a notable squeeze lower before buyers reload on long positions. It would really surprise me if we got a quiet and slow January, all things considered.
As for the hesitancy to say which is more likely, it is to do with the fact that I heavily detest reading too much into year-end and thin liquidity moves such as what we’re seeing this week. As such, I still do hold some reservations about the high points for gold on the week currently.
This article was written by Justin Low at www.forexlive.com.
It’s all just more pushback by the ECB as they are not quite ready to pivot just yet. But we all know that rate cuts might be coming sooner rather than later if things stay on trend in the months ahead.
This article was written by Justin Low at www.forexlive.com.
The dollar’s own vulnerabilities this week is also contributing to the drop in the pair but so far in trading today, it is more about the Japanese yen. The pair is now down to 140.87 with the yen up 0.7% against the dollar. Other major currencies are not doing a whole lot in comparison for the most part.
The drop here sees USD/JPY now at its lowest since the end of July and may look towards a test of 140.00 as sellers exert further control.
As for the outlook going into next year, I shared some thoughts earlier this week: The Japanese yen is an early contender for the most interesting major currency in 2024
This article was written by Justin Low at www.forexlive.com.
AUD/USD
and NZD/USD rallied during morning Asia trade but have each shown
retracements. AUD/USD is almost back where it began while NZD/USD has
held a little higher. As with other major-traded forex rates, the
swings were not large.
USD/JPY
dropped to lows just under 141.20 and has retraced to just above
141.40 as I update.
The news flow for the session was negligible. On the data front, we had not as
bad as expected industrial output from Japan for November, and better
than expected retail sales.
This article was written by Eamonn Sheridan at www.forexlive.com.
His remarks didn’t contain any surprises:
Ueda is looking forward to the Bank’s regional branch managers‘ meeting in the middle of next month, saying it would deliver „quite a lot of information“. On the prospect of a policy shift at the January 22 – 23 meeting:
More:
USD/JPY update:
This article was written by Eamonn Sheridan at www.forexlive.com.
I would say that the dovish and hawkish skew for the Fed is taking on less importance than usual in this current setting and will likely be the case as well for next year. As of late, policymakers tend to communicate in a more consistent manner in trying to cement their credibility in the fight against inflation.
The first half of next year will still involve that sort of thinking but even as rates are to move lower, we are likely to hear a more uniform message from the Fed. It’s all about guiding markets in the right direction now, so as to not afford any major screw ups in communication. That seems to be the way that policymakers these days prefer to play things out.
It seems like they are more worried about their image than really trying to stand out and mess with the status quo. But that’s a conversation for another time. For now, let’s take a look at the voting rotation for the FOMC going into next year.
Among the rotating members, it seems like we’re moving from a balance of one more hawkish member to one more dovish member instead. But at this stage as mentioned, it’s all about moving towards a more uniform communication. As such, I wouldn’t put too much emphasis on the dovish or hawkish skew in the voting intentions.
This article was written by Justin Low at www.forexlive.com.
And yet, that only really manifested in the final two months of the year. That after markets and the Fed needing added time to really be convinced of the disinflation process. But even so, the aggressive nature of the rate cuts pricing since November has put the dollar down by quite a fair bit after its strong positioning for the better part of 2023.
Here’s a snapshot of the major currencies performance against the dollar for the year:
The Japanese yen is of course the exception as it has been greeted with much disappointment amid any policy pivots but also after a surging run higher in bond yields right up until Q4 2023.
But as you can see, European currencies are the ones taking full advantage of the dollar’s retreat. And that comes despite the fact that markets are also seeing quicker rate cuts by the ECB and BOE heading into next year. The difference is that perhaps the disinflation narrative there isn’t as prevalent as in the US, making the conviction for Fed rate cuts that much stronger.
And that especially after the change in language by Fed chair Powell in the final FOMC meeting for the year and also from the dot plots projection.
So, will the run lower in the dollar, like what we have seen in the last two months, continue into the new year? And will that be the main story in trading for 2024?
If trading this year is anything to go by, it might not be as straightforward as that.
There’s still going to be a lot of moving parts to scrutinise, with the most important one being the inflation outlook. For now, the disinflation process looks to be going uninterrupted. And that is helping to spur on risk trades as well. In other words, it’s a complete reversal to the early stages of this year as traders now opt for a sell the dollar, buy everything else mood.
The next key thing to watch will be how the global economy fares. Currently, the fact that a soft landing is the likely scenario to beckoning is also helping to cushion the pessimistic hammer on risk assets. Indirectly, that’s a headwind for the dollar as such.
But if there are growing concerns that a soft landing may turn into something worse, that could help to turn things around for the dollar. That especially if the US continues to be the cleanest shirt among the dirty pile of laundry.
For now, it is vital to be aware that markets are treating as though this i.e. dollar demise, is going to be the main theme in trading next year. That is evident by the pricing in rates and central banks in the last few weeks, as well as the price action across asset classes. So, if there is going to be reason to run all of that back, the correction/retracement can be quite a forceful one in favour of the greenback.
That will be a key consideration for trading next year when thinking about the supposed imminent demise of the dollar.
This article was written by Justin Low at www.forexlive.com.