Looking at the recent data collected, it’s clear that the U.S. economy is showing resilience. The labour market is cooling but remains manageable. Inflation metrics indicate persistent price growth, hovering about one percentage point above the Fed's 2% target. Notably, the Consumer Price Index (CPI) in November held steady, with both headline and core figures aligning with economists’ forecasts, according to the U.S. Bureau of Labor Statistics (BLS).
The Federal Reserve's policymakers are also signalling a likely 25 basis point cut this December. While lowering rate seems to be the direction they’re heading, officials have also noted that the current monetary policy is positioned for more gradual reductions moving forward. We expect that during the upcoming Federal Open Market Committee (FOMC) meeting on December 18, they will indeed lower the federal funds rate by 25 basis points. However, they’ll likely emphasize that any future cuts will be slower and reliant on new economic data. With this backdrop to 4.50%-4.75%, any additional easing might unfold at a pace of alternating meetings.
On another note, gold prices kept climbing on Wednesday, spurred by the latest U.S. inflation data. The expectation of a Fed interest rate cut next week seems to grow stronger, even as the disinflation process continues to unfold slowly. Gold has surpassed the $2,700 level but is still below the peak of $2,721 reached on November 25. The first resistance for bullion stands at $2,721; if momentum persists, the next target could be $2,750, followed by the all-time high of $2,790. On the downside, if gold dips below the 50-day Simple Moving Average (SMA) at $2,685, support could be found around $2,650, with $2,600 looming just below.
Turning to crude oil, prices were trading around $69.95 on Thursday. The Biden administration is seriously considering stricter sanctions on Russia’s oil trade to ramp up pressure on the Kremlin, especially with Donald Trump set to return to the White House. The European Union is also on board with new sanctions against Russia due to its ongoing conflict in Ukraine. These developments could tighten global crude supplies and push WTI prices higher. The WTI market is showing signs of resilience amid worries about potential tighter sanctions on both Russia and Iran. It is expected to currently fluctuate within the range of $66.85 - $71.54 until further developments occur.
To conclude, keeping an eye on emerging trends and data that could reshape our understanding of the economic landscape. Ultimately, the next few months will be critical in determining how these varied perspectives will influence policy decisions and economic outcomes.
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