Shares in global markets have dipped as investors anticipate a week packed with central bank meetings and US inflation data that could impact the likelihood of future interest rate cuts. The Federal Reserve is expected to keep rates steady this week but investors will be closely watching for any changes in the dot plots for rates and Chair Jerome Powell’s press conference. The consumer price report for November will also play a key role in shaping market expectations. Analysts are predicting an unchanged headline rate and a 0.3% increase in the core rate. John Briggs, the global head of strategy at NatWest Markets, anticipates a Fed-friendly CPI report but believes that economic conditions have not changed enough for officials to drop their tightening bias. He suggests that Fed Chair Powell may leave the option of a possible interest rate hike on the table.
On Thursday, the European Central Bank, the Bank of England, Norges Bank, and the Swiss National Bank will all have their own meetings. While Norway is the only one expected to potentially raise rates, there is a possibility that the Swiss National Bank may intervene to weaken the franc. These central bank meetings have heightened caution among investors, resulting in a decline in shares in Asia-Pacific and Europe.
The US Treasury market is also facing a significant test as it prepares for $108 billion in new supply of three-year, 10-year, and 30-year bonds. Yields on 10-year notes have remained steady at 4.25%, despite a slight increase following the release of the upbeat US payrolls report.
Currency markets are closely monitoring the Bank of Japan’s meeting next week, as speculation swirls regarding the possibility of another step away from its super easy policy. The yen has weakened against the dollar, reaching 146.28 yen, after analysts at Goldman Sachs suggested that the Bank of Japan may not make any moves this month. Meanwhile, market pricing for early European Central Bank rate cuts has pressured the euro, resulting in the dollar gaining against the euro at $1.0765.
In commodity markets, gold prices have fallen to $1,997 an ounce following the release of the positive US payrolls report. Oil prices, on the other hand, have slightly increased after a 3.9% slide last week. The market is closely watching the COP28 climate summit, which is working towards a deal to phase out the use of fossil fuels worldwide.
Overall, investors are approaching the upcoming week with caution as they await the outcomes of central bank meetings and key economic data. The decisions made by central banks and the inflation report will likely have a significant impact on market expectations and the possibility of future interest rate cuts.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )