Market volatility surged last week in response to the monetary policy announcements from the Federal Reserve, the Bank of Japan (BoJ), and the Bank of England (BoE). This led to a boost in the US dollar while major currencies faced pressure, causing gold prices to decline.
However, the release of US inflation data based on Personal Consumption Expenditure (PCE) last Friday reversed this trend and is expected to impact trading on Monday (December 23, 2024).
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GOLD
Gold prices (XAUUSD) increased by over $29, or 290 pips, reaching $2,623.22 per troy ounce. Gold recorded a two-day rally, distancing itself from a one-month low, amid a reported 2.8% year-on-year (YoY) growth in core PCE inflation, which was lower than the Trading Central forecast of 2.9% YoY, but consistent with October’s 2.8% YoY growth.
This release ignited hopes that the Fed might cut interest rates more than twice next year if PCE inflation continues to decline, positively influencing gold sentiment, expected to be felt during today’s European trading session.
OIL
Oil prices (CLS10) managed to climb by $0.34 to $69.55 per barrel last Friday after dipping to $68.44 per barrel earlier.
The optimism surrounding the Fed potentially cutting rates more than twice next year allowed oil to end a four-day decline. A more aggressive rate cut could boost oil demand considerably.
EURUSD
The EURUSD soared by 658 points (65.8 pips) to 1.04280 during last Friday’s trading session. This rise marks two consecutive days of gains, pulling away from its lowest levels in nearly two years.
The stagnant core PCE inflation data triggered this sharp increase, as it opens the door for the Fed to lower rates more than twice next year, narrowing the gap with the European Central Bank (ECB).
This sentiment is expected to continue influencing EURUSD movements in the European session.
GBPUSD
GBPUSD increased by 660 points (66 pips) to 1.25646 last Friday. This currency pair rebounded from a seven-month low as hopes rise for the Fed to reduce rates more than twice in the upcoming year.
Such a scenario could keep the Fed’s rates lower than those of the Bank of England (BoE), fostering positive sentiment for GBPUSD, likely to persist in the European trade.
USDJPY
USDJPY fell by 969 points (96.9 pips) to 156.442 last Friday. This pair had recently reached a five-month high before reversing direction due to profit-taking actions following the PCE inflation data release.
The USDJPY position remains close to the five-month high, suggesting that profit-taking might continue in the European trading session.
Nasdaq
The Nasdaq index experienced significant volatility before gaining 145 points to reach 21,552 last Friday. A prior massive sell-off caused the Nasdaq to tumble sharply on Wednesday following the Fed’s projection of only two rate cuts next year.
However, the release of US core PCE inflation data rekindled hope for more than two cuts, resulting in heightened volatility and encouraging positive sentiment towards the Nasdaq.
