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The Week Ahead – End of an era?

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key data release
EURUSD jumps as rate difference may stay steady
EURUSD-CHART-17-11-23

The euro clawed back previous losses as the Fed might keep its rates unchanged from now on. The US dollar’s weakness in the wake of a soft CPI reading has sent the single currency flying. Market participants have further dialled back their bets of more tightening from the US, which would leave the rate differential steady across the Atlantic. The euro zone economy showed a slight contraction in the third quarter, but the ECB is optimistic that the bloc could avoid the abyss and the price action is showing that traders would reckon a stagnation rather than a deep recession. 1.1030 is the next hurdle and 1.0660 a fresh support.

USDCAD braces for inflation reading

USDCAD-CHART-17-11-23

The Canadian dollar recovered some lost ground as traders prepared for key inflation data. The Bank of Canada has raised interest rates ten times to tame inflation and now it is time to judge its full impact. Home sales have recorded its fourth straight month of declines as higher borrowing costs continued to bite. While the central bank warned that the era of cheap money was over, economic data are likely to dictate market pricing. Further confirmation of a slowdown in consumer price growth may reinforce expectations of rate cuts in the first half of 2024. The pair is holding above 1.3570 and 1.3950 is an important resistance.

UKOIL falters as major economies contract

UKOIL-CHART-17-11-23

Oil prices pull back as the global demand outlook remains a major unknown factor. Cooling inflation and geopolitical headlines have made the bulls wary of putting up large bets. A shallow recession in Japan and the European Union might keep business and consumer demand subdued for an extended period of time. Neither optimistic demand forecasts by the IEA and OPEC or the latter’s commitment to maintain voluntary oil production cuts until the year end has succeeded in keeping the price afloat. Soaring US crude stocks definitely further weigh on market sentiment. 72.00 is a critical floor and 87.00 the immediate hurdle.

SPX 500 recovers on softening US data
US500-CHART-17-11-23

The S&P 500 soared on bets that monetary tightening could be over in the US. Even though companies have been cautious about their forecasts, especially on the retail side as consumers are tightening their belts, general sentiment remains positive amid cooling US inflation and a loosening job market. Another hike pause from the Fed to conclude the year seems to be a done deal. Growing speculations that the central bank would start to consider cutting rates sooner than officials want the market to believe may give equities a solid boost, helping the index finish the year in the green above 4600. 4340 is the closest support.

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