The market experienced significant volatility last week following the monetary policy announcements from the Federal Reserve, the Bank of Japan (BoJ), and the Bank of England (BoE). These announcements initially bolstered the US dollar while putting pressure on other major currencies and causing a decline in gold prices.
However, the release of US inflation data based on the Personal Consumption Expenditure (PCE) on Friday altered the market’s trajectory and is expected to influence trading on Monday (12/23/2024).
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GOLD
Gold prices (XAUUSD) surged by over $29 or 290 pips, reaching $2,623.22 per troy ounce. Gold managed to record two consecutive days of gains, moving away from a one-month low as the core PCE inflation was reported to have grown by 2.8% year-on-year (YoY), slightly below Trading Central’s forecast of 2.9% YoY, yet consistent with October’s growth rate of 2.8% YoY.
This release sparked hopes that the Fed could cut interest rates more than twice next year if PCE inflation shows a continued decline, creating a positive sentiment for gold that should carry over into today’s European trading session.
OIL
Oil prices (CLS10) increased by $0.34 to $69.55 per barrel on Friday after dipping to $68.44 earlier in the session.
The anticipation of the Fed potentially reducing interest rates more than twice next year aided oil prices in ending a four-day decline. An aggressive cut in rates could raise demand for oil significantly.
EURUSD
The EURUSD surged by 658 points (65.8 pips) to 1.04280 during Friday’s trading. The pair experienced two consecutive days of gains, recovering from its lowest level in nearly two years.
The stagnant core PCE inflation data was the catalyst for this significant increase, indicating that the Fed may lower rates more than twice next year, thus narrowing the gap with the European Central Bank (ECB).
This sentiment is expected to continue influencing EURUSD movements in the European trading session.
GBPUSD
The GBPUSD rose by 660 points (66 pips) to 1.25646 on Friday. This currency pair rebounded from a seven-month low due to optimism surrounding the Fed cutting rates more than twice next year.
Such a scenario could maintain the Fed’s rates below those of the Bank of England (BoE), offering a positive sentiment for GBPUSD that is likely to carry over into the European session.
USDJPY
The USDJPY fell by 969 points (96.9 pips) to 156.442 during Friday’s trading. The pair had previously reached a five-month high before reversing direction due to profit-taking after the core PCE inflation data was released.
The USDJPY remains close to the five-month high, suggesting that profit-taking activity may continue in the European trading session.
Насдак
The Nasdaq index displayed high volatility before recording a gain of 145 points to 21,552 on Friday. Massive sell-offs previously had caused the Nasdaq to plummet sharply on Wednesday after the Fed projected only two rate cuts for the following year.
However, the release of the core PCE inflation data ignited hopes for more than two cuts, leading to considerable volatility and providing a positive sentiment for the Nasdaq.
