Week of december 9

During the previous week, markets digested weaker European PMI data and jobless figures from the US while geopolitical tensions escalated.

The upcoming week will see an acceleration in market-moving releases, including interest rate decisions from the RBA, the BOC and the ECB, as well as inflation data from the US and monthly GDP figures from the UK.​

Week in Review

The markets remained relatively stable during the week, awaiting the final batch of key data for the year that would likely influence the pace of interest rate cuts over the next couple of weeks.

Fed Chair Jerome Powell stated that the economy performed better than expected in September when the dot-plot matrix suggested a rate cut in December.

The final reading of Euro Area Manufacturing PMIs confirmed a further contraction in the shared economy, with both Germany and France being revised downwards. ECB Christine Lagarde acknowledged that growth would be weak in the short term, signalling bold policy action to stimulate the economy. She also indicated that the battle against inflation was nearing completion and that interest rates would likely decrease, although she offered no clues about the pace of cuts.

UK Manufacturing PMI was also revised downwards and further into contraction. BOE Governor Andrew Bailey indicated there would be four rate cuts next year based on current forecasts, with the bank likely pursuing "gradual" easing going forward.

OPEC+ confirmed that it would delay the oil production hike by three months, maintaining voluntary curtailments.

Japanese Prime Minister Shingeru Ishiba suggested considering an appropriate exchange rate level, but no further details were provided. BOJ Board member Toyoaki Nakamura rejected being labelled a "dove" and argued that the next rate decision would be "data dependent".

Chinese manufacturing PMI exceeded expectations, but trade concerns weighed on the country's outlook, with yields on the country's debt falling to record low levels in anticipation of more easing by the PBOC.

Australia's Q3 GDP increased to 0.3% growth from 0.2% but fell short of the expected 0.4%.

In geopolitical developments, South Korea's president declared martial law in a surprise move but quickly reverted it due to political pressure. The Bank of Korea intervened to reassure markets of liquidity during the political crisis. Subsequently, the South Korean president faced impeachment. In Europe, French Prime Minister Michel Barnier was pushed through a budget opposed by Parliament, triggering a no-confidence vote and his subsequent resignation.​

Biggest Market Movers

• Bitcoin surpassed $100,000 following the proposed appointment of a pro-cryptocurrency individual to lead the SEC, though it declined on Friday.
• Crude oil fluctuated, rising due to reports that Saudi Arabia was willing to maintain production cuts but subsequently falling after the EIA showed a large increase in refined product inventories.
• Kiwi dropped over 1% following the RBNZ decision last week and Finance Minister Nicola Willis's statement that reversing fiscal deterioration would be challenging.​

Top Events in the Week Ahead

The week marks the commencement of a condensed central bank meeting schedule preceding the festive period.

Central Banks in Focus

The ECB is poised to consider cutting interest rates by 50 or 25 basis points, as the economic situation within the bloc has deteriorated since the previous gathering and inflation has increased. Although the surge in consumer prices was expected, the focus on the economic climate amidst the political crisis concerning expenditures in the region's two largest economies could sway the decision towards a more accommodative policy. EURUSD faces strong resistance at 1.06, with an easier path below 1.05.

The BOC is also contemplating an interest rate cut by either a quarter or a half percentage point, as recent GDP figures failed to meet projections. The majority of economists are inclined to endorse the larger rate cut or, at the very least, strongly imply further easing measures if a smaller cut is implemented. The Loonie continues above 1.40, with both 1.41-1.42 and the 1.39-1.38 regions in focus.

The RBA is scheduled to convene as well, with a universal expectation that rates will stay on hold, particularly after Governor Michelle Bullock recently stated that there was no necessity to adjust policy until well into the subsequent year. After testing 0.64, a break lower may pave the way to 0.63, with a bounce eying 0.65.

CPI Data Take Centre Stage

The US is scheduled to release its CPI data for November on Wednesday. Economists expect a marginal increase in the headline inflation rate to 2.7% from 2.6% prior. However, the core inflation rate is expected to remain unchanged at 3.3%, mirroring last month's PCE. While the bulk of market participants expect a rate cut from the Fed at its next meeting, a core inflation rise may change this, particularly in light of Chair Jerome Powell's remarks portraying confidence in US economic growth. Powell's remarks imply that the central bank may have more flexibility to keep interest rates at their current levels.​ Support for gold below $2600 lies at $2535 per ounce, while resistance can be seen at $2760.

Relief or Blow to Labour: UK GDP

The release of the UK's monthly GDP figures on Thursday holds significant implications for the labour market. After a negative reading in September, economists forecast a rebound to a positive 0.2% growth rate for October, ahead of the Budget announcement. However, a negative GDP figure could set an unfavourable precedent for the final quarter of the year, as the economy is expected to face additional pressures from proposed tax hikes.​ Cable approaches the 200-week MA of 1.2818, with a move higher eying the 1.29 handle. On the flip side, support sits at 1.26.

Other Events, Earnings

The forthcoming week holds several key economic data releases. On Monday, China will publish its inflation figures. Tuesday brings the NAB business confidence data from Australia. The Reuters Japan Tankan index is scheduled for Wednesday. The US PPI is anticipated on Thursday. Friday features the Westpac consumer confidence figures from Australia.

Additionally, several prominent companies, including Oracle, AutoZone, GameStop, Adobe, Broadcom, Lennar, Costco, British American Tobacco, and Curry's, are expected to update investors.​