The week ahead: Santa Claus rally and holiday season take center stage

　　

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

What happened in the market last week?

United States 2023 Wrap-Up:

• Strong economic indicators: robust consumer spending.  

• Stable inflation rates, buoyed by decreasing trends.  

• The housing sector shows signs of improvement due to lowered mortgage rates.  

• Broad-based job growth reported nationwide.

Global Central Banks in 2023:

• Active year for central banks globally. 

• Ongoing discussions and actions by Asian and Latin American policymakers.  

• Focus on interest rates and future monetary policy strategies.

• No relaxation in policy planning despite the year-end.

Source: VT Markets MT4

Market pair movements in the last week
(All data taken from MT4)

Amidst cooling inflation and declining price pressures showcased by recent government data, traders escalated their expectations for the U.S. Federal Reserve to initiate rate cuts by March. November’s annual U.S. inflation dipped below the 3% mark while underlying price indicators sustained a downward trajectory. Reflecting these shifts, the dollar index reached a nearly five-month low, amplifying the allure of gold for international purchasers. Simultaneously, benchmark 10-year bond yields hovered near their lowest points since July, marking a confluence of factors potentially prompting future monetary policy adjustments.

• GBPUSD increased by 0.13%.
• DJ30 increased by 0.15%.
• USDJPY increased by 0.27%.
• NAS100 increased by 0.83%.
• EURUSD increased by 1.06%.
• XAUUSD increased by 1.64%.
• USOUSD increased by 1.88%.

Source: VT Markets Economic Calendar

What to focus on this week?

With no high-impact news expected, the market’s attention will be focused on the holiday season this week. Investor sentiment is likely to be influenced by holiday festivities, resulting in increased shopping activity and the investment of holiday bonuses. Additionally, the end-of-year period typically coincides with institutional investors going on vacation, leaving the market in the hands of comparatively bullish retail investors. This phenomenon, known as the Santa Claus rally, is expected to occur in the last week of December.

Holiday-related factors aside, here are several other medium-impact market indicators to watch for in the last week of 2023:

US unemployment claims (28 December 2023)

The number of Americans filing for unemployment benefits increased by 2,000 to 205,000 in the week ending 16 December, staying close to the 2-month low of 203,000 seen in the previous week.

Analysts expect a further rise to 207,000 in the week ending 28 December.

Takeaway: The stability in weekly unemployment claims in the US is fostering optimism in the markets regarding the economy. This positive outlook could serve as a guide for the upcoming labor data on the first day of the next month. Nevertheless, a higher reading in this data might exert a slight negative effect on the US Dollar.

US pending home sales (28 December 2023)

Following a 1% rise in September 2023, pending home sales in the US dropped 1.5% month-over-month in October, marking the lowest level since records were first kept in 2001.

Analysts expect a 0.5% increase in the figures for November, set to be released on 28 December.

Takeaway: The decrease in US pending home sales reflects the current economic conditions in the country. This positive trend could serve as an indicator of the economic landscape in the US. However, a higher reading in this data might actually have a positive effect on the US Dollar.

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.