![\"US](\"\/wp-content\/uploads\/2023\/12\/image-76.png\")
<\/figure>\n\n\n\nGBP \u2013 BoE remains on hold<\/h2>\n\n\n\n
The pound is about to end the week lower against the JPY and EUR, yet stronger against the dollar. On a fundamental level, we note that the political turmoil within the UK continues, with current PM Rishi Sunak, \u201cbattling\u201d to keep his Conservative party united, as cracks under his leadership appear to be intensifying. On a monetary level, we note that the BoE remained on hold during Thursday\u2019s monetary policy meeting, as was widely expected. Yet with market expectations of four rate cuts by the BoE next year, BoE Governor Bailey during his press conference, appeared to push back at those expectations by appearing slightly hawkish, having stated \u201cThere is still some way to go\u201d when referring to taming the inflation beast. Moreover, the bank stated that \u201cCPI inflation is expected to remain near to its current rate around the turn of the year\u201d, implying that the battle against inflation may not be over, and as such the potential for a tight monetary policy may support the pound. On a macroeconomic level, the UK\u2019s GDP rates for October which were released on Tuesday, came in lower than expected at -0.3% on a mom basis. The lower-than-expected GDP rates, may be concerning for the UK economy and as such could weigh on the pound, should further financial releases imply that the UK economy may be entering a recession in 2024. As such, pound traders may be interested in next week\u2019s CBI trends orders and distributive trade figures for December. Yet we anticipate that traders may be more focused on the UK\u2019s CPI rates for November and should they come in higher than expected in addition to potentially the GDP rate for Q3 coming in lower than expected, we may see heightened fears for a recession weighing on the pound and vice versa.<\/p>\n\n\n\n JPY is gaining ground across the board in a sign of broader strength. The political norm in Japan appears to have been shaken up, with the current Government\u2019s ruling party facing one of the biggest financial scandals in the past decade. Per Reuters, the allegations are in regards of lawmakers receiving roughly $3.5 million in fundraising proceeds which are missing from party accounts. Although the scandal may not have an immediate effect, it could destabilize the Japanese political scene and thus weigh on JPY. Last week, we saw The common currency is about to end the week in the greens against the USD and GBP, yet lower against the JPY for the third week in a row. On a fundamental level, we note that Germany\u2019s government has agreed to a budget deal in order to address a budget gap, following a landmark court ruling. The agreement could ease concerns about Europe\u2019s largest economy, in terms of worsening their current debt-to-GDP ratio. On a monetary level, we note that the ECB kept rates unchanged as was widely expected, yet also note that market expectations are for the bank to start cutting rates in early March and end the year with a total of 6 rate cuts. It should be noted that in the bank\u2019s accompanying statement, it was stated that \u201c ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution\u201d to reducing inflation, implying that the ECB has reached its terminal rate and as such it could keep the EUR supported. Furthermore, during ECB President Lagarde\u2019s presser, she mentioned a measurement that has not declined which is a concern to the ECB and the measurement is domestic inflation, which may provide additional support for the EUR. Yet we also tend to remain worried about the Eurozone\u2019s manufacturing activity following the release of the Eurozone industrial production rate for October which came in at -0.7%, furthermore despite Germany\u2019s ZEW Economic sentiment improving, the current conditions came in lower than expected, implying that the outlook for Germany\u2019s economy may be improving yet the conditions on the ground still need some work. Hence, we tend to focus also on the release of the Germany\u2019s Ifo business climate figure for December and Consumer sentiment figure for January next week, with some emphasis on the Eurozone\u2019s preliminary consumer confidence figure for December which are due to be released. Yet, based on the ECB\u2019s comments this week, we do not anticipate the releases to have a significant impact on the common currency. Eurozone’s preliminary PMI figures for December proved to be a market mover. Characteristically the contraction of economic activity in Germany’s manufacturing sector is dragging economic activity in the services sector lower Overall the data show a grim picture for Eurozone’s economic outlook and understandably weakened the EUR.<\/p>\n\n\n\n AUD is about to end the week in the greens against the USD. On a monetary front, we note that RBA\u2019s December meeting minutes are due to be released next week. As such following last week\u2019s monetary policy meeting, in which the bank implied that inflationary pressures in the economy, continue to moderate, traders may be looking for signs that RBA is preparing to cut interest rates. In such an event we may see the Aussie weakening, whereas should the meeting minutes imply that such a scenario may not be on the table yet, we may see the Aussie gaining some support. Yet based on recent indications by RBA officials, we do not expect the latter to be the case. On a fundamental level, we note that the market sentiment may have a wider effect on AUD\u2019s direction, given the Aussie\u2019s riskier asset nature, as it is a commodity currency in nature. On a macroeconomic level, Australia\u2019s employment data came in better than expected, implying that the Australian economy still remains relatively tight, which could further aid the Aussie\u2019s ascent. However, given the close Sino-Australian economic ties, traders may be interested in China\u2019s industrial production rate for November, The Loonie is about to resume its winning streak against the USD and end the week in the greens. On a monetary level, BoC Governor Macklem is due to speak later on today, with traders potentially looking for an indication into the bank\u2019s inclination. Should he sound hawkish, the Loonie may gain and vice versa. Moreover, traders also be interested in the BoC\u2019s December deliberation minutes which are due to be released on Wednesday, given that during the bank\u2019s October deliberations, they had stated that higher global oil prices were standing in the way of the disinflationary process. As such, given the decline in oil prices, it may be interesting for traders to see how the bank may have factored this change into their deliberations and economic outlook for the future. On a fundamental level, we note that oil prices over the week are on track to end relatively higher, which may end oil\u2019s 7-week decline. Should oil prices manage to regain traction, with the bears ceding control to the bulls, we may see the higher prices providing support for the Looney, given Canada\u2019s status as a major oil producer. On a macroeconomic level, we note that Canada\u2019s housing start figure for November is due to be released later on today. However, traders may be more interested in next week\u2019s CPI rates, which should indicate an acceleration in inflationary pressures, we may see the Loonie gaining and vice versa. Furthermore the release of Canada\u2019s GDP rate for October may provide insight into the economic resilience of the Canadian economy and based on our fundamental argument above, we may see a decline in economic growth, which could weigh on the Loonie. On the other hand, should the Canadian economy show signs of growth, we may see the Loonie gaining. Lastly, a testament to the resilience of the Canadian economy on the consumers side, may be the Retail sales rate in October.<\/p>\n\n\n\n Overall we expect in the coming week the USD to continue leading the charge over other currencies, given the frequency and gravity of US financial releases. Moreover, we expect volatility to pick up, as we near the end of the year, despite the majority of interest rate decisions having occurred already. In regards to US stock markets, we saw the bulls take over completely, with all three major indexes moving higher and in particular the Dow Jones 30 index, reaching new all-time highs on Thursday, mostly due to the possibility of![\"Graph](\"\/wp-content\/uploads\/2023\/12\/image-77.png\")
<\/figure>\n\n\n\nJPY \u2013 BoJ interest rate decision in sight<\/h2>\n\n\n\n
heightened excitement amongst traders that the BOJ was ready to end its decades-long ultra-loose monetary policy. Yet, following a report by Bloomberg, which claimed that BOJ officials see little need to drastically abandon their negative interest rate in next week\u2019s BOJ meeting. The report seemed to tame the market’s expectations of an imminent rate hike. Nonetheless, with the BOJ\u2019s interest rate decision due next week and JPY OIS currently implying a 90.64% probability for the bank to remain on hold, market participants may be more eager to hear BOJ Governor Ueda\u2019s press conference. Overall, should we see the BOJ Governor, providing a timeframe for policy normalization, we may see the JPY gaining, whereas should the Governor push back on expectations of a potential rate hike next year in April, the JPY could weaken. Moreover, should we see more BoJ policymakers gradually hinting at the end of the negative rate policy, it may provide support for the JPY, as it could re-affirm existing expectations of a potential rate hike next year. On a macroeconomic level, the Tankan Manufacturing Index for Q4 came in higher than expected, yet some of our concerns about the outlook and economic activity of the Japanese economy tend to remain. In the coming week, we turn our sights on Japan\u2019s trade balance in an attempt to gauge Japan\u2019s manufacturing competitiveness and economic resilience, whilst the Nationwide CPI rates, may provide insight into the effectiveness of the bank’s current monetary policy in reaching their 2% inflation target.<\/p>\n\n\n\n![\"Japan](\"\/wp-content\/uploads\/2023\/12\/image-78.png\")
<\/figure>\n\n\n\nEUR \u2013 The ECB remained on hold<\/h2>\n\n\n\n
![\"Bar](\"\/wp-content\/uploads\/2023\/12\/image-79.png\")
<\/figure>\n\n\n\nAUD \u2013 RBA December meeting minutes due out next week<\/h2>\n\n\n\n
which came in better than expected, implying a rebound in China\u2019s economic activity. As such, given their close economic ties, the Aussie may benefit from an improving economic climate in China. We note that we do not anticipate any major financial releases from Australia next week and as such the currency\u2019s direction, may cede control to fundamentals.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-80.png\")
<\/figure>\n\n\n\nCAD \u2013 BoC December monetary policy deliberations due out next week<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2023\/12\/image-81.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n
more favourable financial conditions, given the Fed\u2019s pivot. Yet we do highlight a small divergence from this week\u2019s market rally, with Microsoft (#MSFT) closing in the reds during Thursday\u2019s trading session, despite the optimistic outlook for the US stock markets. Special focus could be placed on the US Core PCE rates which are the Fed\u2019s favourite tool for measuring inflationary pressures. In addition, gold\u2019s price tended to reverse trajectory, and it\u2019s currently moving higher, once again highlighting its negative correlation with the USD. We also note that the US bonds in particular the 5-Year and 10-Year moved lower for the week, as the Fed implied that the door for rate cuts next year, is wide open. Lastly, we note our continued concern over the escalating tensions between Venezuela and Guyana, as any military conflict could destabilize the region and lead to higher oil prices, given the two nations\u2019 status as oil-producing countries.<\/p>\n\n\n\n