Three markets to watch next week (13.12.2024)

As the final full trading week of the year unfolds before the Christmas break, a flurry of central bank decisions, coupled with geopolitical developments, command investor attention. Key interest rate announcements from the Federal Reserve, the Bank of Japan, and the Bank of England are expected, alongside significant political events including a confidence vote in Germany, a meeting of European leaders, and the Russian president’s annual press conference, which could hold implications for the war in Ukraine and the incoming Trump presidency. Against this backdrop, the EURUSD, US500, and GOLD are markets worth to watch this week.

EURUSD

Key data releases next week include flash purchasing managers’ indices (PMIs) for December from both the eurozone and the US. A vote of no confidence in Olaf Scholz’s government is scheduled for Monday, while on Thursday, EU leaders will convene to discuss issues pertaining to Ukraine and migration. However, the Federal Reserve’s interest rate decision on Wednesday is likely to be the most pivotal event for this currency pair. While a rate cut is widely anticipated, forward guidance from the Fed will be crucial, particularly given the EURUSD’s consolidation near the 1.0500 level.

US500

The US economic calendar is also packed with significant releases. Retail sales and industrial production figures are due on Tuesday, just ahead of the Fed’s decision. The personal consumption expenditures (PCE) price index, due on Friday, will not influence the Fed’s immediate policy stance but could nonetheless offer valuable insights into the direction of monetary policy next year. With the end of the fourth quarter approaching, attention will also turn to earnings releases from companies including Micron, Nike, and FedEx, given the peculiarities of fiscal year reporting schedules. The S&P 500 remains close to its record highs, with the Santa Claus rally statistically gaining momentum in the latter half of December.

GOLD

Gold’s performance is closely related with the trajectory of the US dollar and US interest rates. However, as a safe-haven asset, gold faces competition from currencies such as the Swiss franc and the Japanese yen. The Swiss National Bank opted for a larger-than-expected rate cut last week, while uncertainty persists regarding the Bank of Japan’s future monetary policy stance. In theory, maintaining the current policy stance should prove positive for gold and negative for the yen, by avoiding a shift of capital towards Japan. Geopolitical events, including the German confidence vote, the EU leaders’ meeting, and the Russian president’s address, could also prove significant for gold markets.