As last week's trading drew to a close, global markets continued to seek direction amidst a confluence of multiple variables. Expectations for a Fed rate cut in December have significantly weakened, leading the US dollar to rise for the third consecutive week. The US Dollar Index reached a new two-year high. Despite the strengthening dollar, gold prices surged nearly $153 last week due to a sudden escalation in the Russia-Ukraine tensions. This conflict also became the biggest driver of oil price increases last week, with US benchmark WTI crude oil surging over 6%.

On the other hand, financial markets were driven by a mix of risk aversion and supply-demand dynamics, with major asset classes exhibiting varying underlying logics. The US stock market ended the week higher, with Wall Street closing up for the fifth consecutive time, pushing the Dow Jones Industrial Average to a new historic high. The Dow gained 426.16 points, or 0.97%, to 44,296.51, setting a new closing high and rising for the third trading day in a row; the S&P 500 was up 0.35% at 5,969.34, rising for the fifth consecutive trading day; the tech-heavy Nasdaq Composite rose 0.16% to 19,003.65.

Spot gold initially fell before rebounding last week, with a weekly decline of 1.39%, trading at $2,705.62 per ounce. Gold prices initially dropped below $2,600 to a two-week low of $2,536, but later benefited from multiple factors, including the escalated Russia-Ukraine situation, a stronger dollar, and uncertainty over Fed policy. Geopolitical risks continued to drive safe-haven flows into the gold market, prompting investors to seek refuge in gold. Despite the dollar index also being boosted by risk aversion, gold prices steadily climbed, showcasing its appeal as the "ultimate safe-haven asset."

Last week, although the dollar was strong, silver prices rebounded on Friday, driven by a decline in US Treasury yields, regaining ground to $31.00 per ounce, with gains exceeding 3.20%.

The forex market last week saw the dollar outshine, with its strength remaining a core theme of the market this month, driven by the resilience of the US economy and adjustments in Fed policy expectations. Meanwhile, significant divergence in business activity data from major global economies reflected ongoing growth in the US, while the Eurozone and UK showed signs of recession. These factors collectively shaped the complex forex market environment.

The current US Dollar Index is at 107.45, up 3.5% for the week, near its highest since October 2023. The Euro fell to 1.0428 against the dollar, and the Japanese yen slightly fell to 154.36, reflecting the bleak outlook for the European economy and the yen's safe-haven demand.

The oil market also performed well last week, with both Brent and US crude oil recording nearly a 5% weekly gain, the largest since late September. Current data shows Brent crude trading at $74.36 per barrel and US WTI crude at $71.10 per barrel.

Last week, Bitcoin surged, breaking through $99,000 to reach a new historical high of $99,295, but failed to conquer the $100,000 mark before retreating. The media technology group TMTG under US President-elect Trump hinted at accepting cryptocurrency transactions and payments in its TruthFi trademark application. The White House is rumored to be setting up a cryptocurrency advisory committee, expected to fulfill Trump's pre-election promise of a national Bitcoin reserve strategy.

Trump's potential return to the White House could "profoundly reshape" the US bond market as the market adjusts to rising inflation expectations, with the trajectory of US Treasury yields likely to climb. The benchmark 10-year US Treasury yield may still break through the 5% threshold, though no specific timetable has been provided, serving as a "magnet" in the current economic environment. The bond market saw relatively stable Treasury yields, with the 10-year US Treasury yield dropping from 4.42% to 4.41% later in the week.

Weekly Outlook:

This week, investors will be presented with numerous significant U.S. economic data, including the U.S. PCE Price Index, and the Federal Reserve will release its meeting minutes. The Reserve Bank of New Zealand is expected to cut interest rates by 50 basis points at its final policy meeting of 2024. The preliminary CPI data from the Eurozone is crucial for the European Central Bank's decision in December. Additionally, the Tokyo CPI data from Japan will impact the performance of the yen.

Recent statements by Federal Reserve officials suggest that the Fed might adopt a slower pace on the path to interest rate cuts. Other central banks, such as the European Central Bank and the Bank of England, are perceived as possibly being more aggressive in cutting rates to support their economies. This week, significant U.S. economic agendas will resume in full swing, with a series of data releases ahead of the Thanksgiving holiday, including the U.S. PCE inflation data and Federal Reserve meeting minutes.

This Wednesday, investors will also encounter a plethora of other important data. The Personal Income and Expenditure (PCE) inflation report will be of great importance, followed by October Durable Goods Orders and the Q3 GDP revision. A day earlier, New Home Sales and the Conference Board's Consumer Confidence Index may also draw some attention. The U.S. stock market will be closed on Thursday for Thanksgiving and will close early on Friday, indicating light trading.

After Trump's unexpected election victory, monetary policy was momentarily overshadowed by politics. However, the focus has primarily returned to the Federal Reserve as investors increasingly doubt how many more times the Fed can cut rates before the upcoming U.S. government implements inflation policies. Fed Chair Powell has joined the hawkish camp of the Federal Open Market Committee (FOMC), hinting at a pause in rate hikes. Thus, the likelihood of rate cuts will depend on the strength of the next inflation and employment reports before the December meeting.

Yen Watches Tokyo CPI:

Data to be released this Friday, including Tokyo's CPI for November, is under scrutiny. Although Tokyo's inflation rate in October was below the Bank of Japan's target of 2.0%, it has not deterred policymakers from considering further rate hikes. Now, the issue is more about timing. With investors split on the possibility of a December rate hike by the Bank of Japan, stronger-than-expected Japanese CPI data could boost bets for a year-end rate hike, potentially driving the yen higher.

Eurozone CPI Crucial for ECB's December Decision:

Despite increasing pessimism about the growth prospects of the European economy, European Central Bank policymakers have been downplaying investors' expectations of a 50-basis-point cut in December, highlighting concerns about cutting rates too quickly. The market estimates the likelihood of a 50-basis-point cut by the ECB in December at about 25%, which, if the ECB's latest statements are credible, might exaggerate the real possibility. This means that significantly increasing the likelihood of a 50-basis-point cut still poses considerable difficulty.

However, the preliminary Eurozone CPI for this Friday will be closely monitored. The expected annual CPI growth rate for November could rise to 2.4%, potentially shattering hopes for further significant rate cuts and possibly helping to stop the recent slide of the euro against the dollar.

Will CPI Data Add to the Australian Dollar's Pain?

Australia will also release its latest CPI data. October's monthly data will be announced this Wednesday, and Q3 Capital Expenditure data will be watched on Thursday. In September, the annual inflation rate dropped to 2.1%, at the lower end of the Reserve Bank of Australia's target range of 2%-3%. However, the Reserve Bank of Australia is not yet ready to start easing, with investors not expecting rate cuts until at least May 2025. If the October CPI annual rate increase meets expectations and rises to 2.3%, the Australian dollar against the recently strong U.S. dollar might find some support.

Canadian Dollar Focuses on Canada's GDP:

Another struggling currency is the Canadian dollar. The Bank of Canada has been more aggressive in cutting rates than other central banks, explaining why the Canadian dollar is this year's third-worst-performing major currency. Canada may cut rates for the fifth consecutive time in December, but after a recent CPI report that exceeded expectations, bets on another 50-basis-point cut have receded. The Q3 GDP data to be released this Friday might not change the Bank of Canada's game plan, but if there are any significant surprises, the Canadian dollar could still make a substantial response.

Reserve Bank of New Zealand May Cut Rates by 50 Basis Points:

This Wednesday, the Reserve Bank of New Zealand will announce its interest rate decision. The Reserve Bank of New Zealand, which has shown extreme hawkishness in the global tightening cycle, made a significant policy reversal this summer, beginning to ease before the Federal Reserve. With New Zealand's CPI annual growth rate dropping into the 1%-3% target range and inflation expectations stabilizing around 2.0%, while GDP growth remains sluggish, policymakers have almost no reason to maintain caution, and a consecutive 50-basis-point cut has already been fully digested by the market. If the Reserve Bank of New Zealand unexpectedly makes a significant rate cut, the NZD/USD could struggle to regain its footing and might fall to new lows for 2024.

Key Events and Economic Data Overview for the Week: (Beijing Time)

Important Events:

Wednesday (November 27): Federal Reserve releases November monetary policy meeting minutes; Reserve Bank of New Zealand announces interest rate decision and monetary policy statement; Reserve Bank of New Zealand Governor Orr holds a monetary policy news conference.

Thursday (November 28): Thanksgiving, markets closed.

Economic Data Overview:

Monday (November 25): New Zealand Retail Sales (Quarterly) (Q3); Germany's IFO Business Climate Index for November.

Tuesday (November 26): Australia's ANZ Consumer Confidence Index for the week ending November 24; UK CBI Retail Sales Diff for November (21-26); U.S. October Building Permits Annualized Total (revised); U.S. Conference Board Consumer Confidence Index for November; U.S. October New Home Sales Annualized Total (adjusted).

Wednesday (November 27): Australia's October ABS CPI Annual Rate - Adjusted (%); U.S. Q3 Real GDP Annualized Quarterly Rate (revised); U.S. October Durable Goods Orders Monthly Rate (preliminary); U.S. Weekly Initial Jobless Claims for the week ending November 23; U.S. October Wholesale Inventories Monthly Rate (preliminary); U.S. October PCE Price Index Annual Rate (%); U.S. October Existing Home Sales Contract Index Monthly Rate (%).

Thursday (November 28): Eurozone November Economic Sentiment Index; Eurozone November Consumer Confidence Index Final Value; Germany's November CPI Annual Rate (preliminary).

Friday (November 29): Japan's November Tokyo CPI Annual Rate (%); Japan's October Unemployment Rate (%); Eurozone November Harmonized CPI Annual Rate - Unadjusted Preliminary (%); Canada's Q3 GDP Annualized Quarterly Rate (%); U.S. November Chicago PMI.

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