![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-39.png\")
<\/figure>\n\n\n\nGBP \u2013 BoE to remain on hold<\/h2>\n\n\n\n
The pound is about to end the week lower against the USD and the JPY and EUR. Pound traders are expected to have an interesting week ahead. We make a start on Tuesday, with the release of UK\u2019s employment data. Should the data show that the UK employment market shows signs of tightening, say for example the unemployment rate drops and the employment change figure rises, we may see the pound getting some support and vice versa. On Wednesday we shift our attention towards economic activity, as October\u2019s GDP and manufacturing output growth rates are to be released. A possible acceleration could provide a boost to pound traders\u2019 morale. The main release though is expected to be BoE\u2019s interest rate decision on Thursday and the bank is widely expected to remain on hold, keeping rates at 5.25% and GBP OIS imply a probability of 98.55% currently, for such a scenario to materialize, practically rendering the interest rate part of the decision as an open and shut case. Hence, market attention is expected to fall on the bank\u2019s future intentions. The market is expecting the bank to start easing its tight monetary policy from June onwards and proceed with a total of four rate cuts in the coming year. We expect a certain degree of hawkishness as the CPI rates, despite a substantial slowdown in October, are still high. Yet a possible recognition that the bank\u2019s rates are in a restrictive territory, could reassure the markets that rate cuts are under way and could weaken the pound. Yet pound traders are also expected to pay attention to the release of the preliminary PMI figures for December, with a special focus being on the services sector indicator.<\/p>\n\n\n\n JPY is gaining ground across the board in a sign of broader strength. Despite the restart of hostilities in Gaza, tensions over Venezuela\u2019s intentions to annex part of Guyana, tankers being seized at the Persian Gulf and understandably a market participant expecting some safe-haven inflows for the Japanese currency, we turn our attention elsewhere. We consider the intentions of BoJ as the main catalyst behind JPY strengthening. It\u2019s characteristic that JPY gained substantially on Thursday after BoJ Governor Ueda\u2019s statements in the late Asian session. The BoJ Governor seemed to imply without providing a timeframe, that the era of negative rates is to be ended, as he visited Japan\u2019s Premier Kishida. The BoJ Governor stated that BoJ does not know what level of interest rate is to be targeted once the negative rates policy is ended. Yet he also implied that such a move may still be premature. Overall, should we see more BoJ policymakers implying an end of the negative rate policy, we may see JPY being supported as it would strengthen the market\u2019s expectations for a possible rate hike as early as March. On a macroeconomic level, we note that Tokyo\u2019s CPI rates for November slowed down, which may foreshadow a slowdown on a national level, given the density of Tokyo\u2019s population. Should rates continue slowing down, we may see some obstacles rising on the path towards a normalisation of BoJ\u2019s monetary policy. Yet the issue extends also towards economic activity as our worries for the economic outlook of Japan tend to intensify after the release of the revised GDP rate for Q3, which showed a wider contraction than initially calculated. In the coming week, we intend to concentrate on the Tankan indexes for Q4 in an effort to gauge the outlook and economic activity of the Japanese economy.<\/p>\n\n\n\n The common currency is about to end the week in the reds against the USD and JPY, yet remains relatively unchanged against the GBP. The monetary policy outlook of the ECB seems to be weighing on the common currency. For the time being the market is expecting the bank to remain on hold on Thursday keeping the refinancing rate at 4.5%. Currently, EUR OIS imply a probability of 94.56% for such a scenario to materialise, yet also that the bank is to start cutting rates in early March and end the year with a total of 6 rate cuts. It should be noted that the HICP rate has slowed down considerably in November\u2019s preliminary release, nearing the bank\u2019s 2% target, strengthening the case for earlier rate cuts. Should the bank on Thursday in its accompanying statement and\/or ECB President Lagarde\u2019s press conference later on, show signs that the bank intends to start cutting rates early next year, we may see the common currency losing some ground. Yet we also tend to remain worried about economic activity and growth, given the contraction marked by the revised GDP rate for Q3, despite being a shallow one. Hence we tend to focus also on the release of the preliminary PMI figures for December, with a special focus being on Germany\u2019s manufacturing PMI figure. Should we see an improvement in economic activity, we may see EUR traders getting a boost, yet should the figures remain below the cut-off point of 50, implying another contraction of economic activity, yet narrower, we may see that boost being moderated.<\/p>\n\n\n\n AUD is about to end the week in the reds against the USD. On a monetary front, we note that RBA remained on hold at 4.35%, as was widely expected. The RBA Governor Bullock\u2019s accompanying statement hinted that inflationary pressures in the Australian economy continued to \u201cmoderate\u201d and as such, may imply that the bank may have reached its terminal rate. Furthermore, the bank implied that inflationary pressures in the economy, continue to moderate, which may further imply that the bank may have reached its terminal rate. Therefore, the statements made by the bank appear to be predominantly dovish, which appears to have weighed on the Aussie. On a fundamental level, we note that the market sentiment may have a wider effect on AUD\u2019s direction, given that the Aussie is considered as a riskier asset, given its commodity currency nature. Also Aussie traders may keep an eye out for the situation in China, given the close Sino-Australian economic relationships. We have to note that the lukewarm Chinese trade data for November, especially the contraction of the import rate, did not seem to excite Aussie traders. Yet on a macroeconomic level, the beyond-market expectations acceleration of the real GDP rate for Q3, seemed to provide some support for the Aussie. On the other hand, the narrower-than-expected widening of Australia\u2019s trade surplus left Aussie traders rather unimpressed. Other than we note the release of Australia\u2019s November business conditions and outlook indicators, as well as December\u2019s consumer confidence. Yet the highlight of next week for Aussie traders, is expected to be employment data for November on Thursday and should the data show that the Australian employment market remains tight we may see the the Aussie getting some support. From China we note the release of industrial output and urban investment growth rates for November on Friday.<\/p>\n\n\n\n The Loonie is about to halt its winning streak against the USD and end the week in the reds. On a monetary level, Bank of Canada remained on hold as was widely expected on Wednesday. In the bank\u2019s accompanying statement, they stated that \u201cThe slowdown in the economy is reducing inflationary pressures in a broadening range of goods and services prices\u201d, which could further imply that the bank is done with interest rates. As such, the perceived dovish statement by the bank, may have weakened the Loonie. On a fundamental level, we note that the weakening of oil prices over the week, may have intensified some bearish tendencies for the Loonie. It should be noted that the oil market tends to remain worried about Overall we expect in the coming week the USD to maintain the initiative over other currencies, given the frequency and gravity of US financial releases. Yet there are a number of high-impact financial releases and monetary policy events that do not stem from the US and could allow other currencies to select their direction. Overall we expect that volatility is to pick up given the high number of high-impact releases from various countries. In regards to US stock markets, we got some mixed signals in the past week and expect fundamentals to lead the way. Special focus could be placed on the Fed\u2019s intentions, yet US financial releases may also provide some increased volatility for equities. On the other hand, gold\u2019s price tended to maintain its negative correlation with the USD and ended the winning streak of the past three weeks ending the current week in the reds. At this point, we have to note that gold\u2019s price dropped despite US bond yields dropping which may have smoothened the losses for the precious metal. Overall, we tend to maintain our expectation that gold\u2019s negative correlation with the USD could be maintained in the coming week despite some asymmetry being present and hence expect that high-impact releases from the US could have also ripple effects on gold.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-40.png\")
<\/figure>\n\n\n\nJPY \u2013 BoJ\u2019s intentions, the catalyst for JPY\u2019s direction<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-41.png\")
<\/figure>\n\n\n\nEUR \u2013 ECB could go first<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-42.png\")
<\/figure>\n\n\n\nAUD \u2013 Employment data to move the Aussie<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-43.png\")
<\/figure>\n\n\n\nCAD \u2013 Fundamentals to lead the way<\/h2>\n\n\n\n
possible weak demand levels from China and the US. Should oil prices continue weakening, we may see them weighing on the Looney, given Canada\u2019s status as a major oil producer. On a macro-economic level, we note that the release of November\u2019s employment data showed an easing of Canada\u2019s employment market\u2019s tightness as the unemployment rate ticked up despite an unexpected rise of the employment change figure which tended to provide some support for the Looney. Also, the widening of Canada\u2019s trade surplus unexpectedly widened providing some support for the CAD. Except for the release of October\u2019s manufacturing sales and November\u2019s house starts on Thursday and Friday respectively, we have no major financial releases in the calendar for CAD traders, thus we expect fundamentals to lead the CAD in the coming week.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-44.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n