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A few days ahead of the end of the 2023 trading year, the USD/JPY pair was back in the 141.00 level. Following the holidays, the US dollar had a thin week, ending the trading year on Friday with a 0.3% decline versus the Japanese yen.
There was an annual loss of 2% for the US dollar. On Friday, the Dollar Index increased as US yields started to rise. After reaching a low point at 101.20, the Index surged towards 101.30.
Demand shifted from the US dollar to riskier assets as a result of the Fed’s dovish approach and prediction of 75 basis points of easing. The market is looking for a rate cut as early as March and another in May.
The US Chicago Purchasing Managers’ Index fell below expectations in December, indicating a broad-market risk appetite, with investors anticipating a faster pace of rate cuts in 2024.
The Euro remains positive despite the US Dollar’s losses due to higher-than-expected US Jobless Claims. US Initial Jobless Claims increased by 218K for the week ending December 23, surpassing the market’s projection of 210K. Pending Home Sales for November fell short of the anticipated 1.0% growth.
The US Dollar is recovering from five-month lows, but investors’ hopes of Fed cuts may limit upside attempts. November’s Pending Home sales are expected to improve, potentially contributing to a deeper USD correction. Recent macroeconomic data confirms a soft-landing scenario for the Federal Reserve, allowing gradual easing of its restrictive monetary policy. Austrian National Bank Governor Rober Holzmann supports the Euro.
Oil’s Performance
Crude oil inventories in the United States rose this week by 1.837 million barrels for the week ending December 22, according to The American Petroleum Institute (API), after recording a 939,000-barrel build in crude inventories in the week prior.
API data shows a net build in crude oil inventories in the United States of just over 21 million barrels so far this year. WTI crude is trading at $72.06 per barrel. Brent crude oil is trading at $77.35 per barrel, by the end of the trading week.
Gold’s Performance
Gold prices have shown strength as the US Dollar faces challenges due to improved market sentiment. Softer US data supports the Fed’s dovish stance in upcoming policy meetings, boosting investor risk appetite.
With the end of the trading week, Gold price was trading higher near $2,070 per ounce during the Asian session, recovering losses from the previous session. However, the softer economic data from the US might have put a ceiling on the dollar’s advance as it reinforces the market sentiment bias towards the Fed’s dovish stance in early 2024 monetary policy decisions.
What to Watch In Next Trading Week:
Next week, the highlights in the US calendar will be December’s Nonfarm Payrolls, Average Hourly Earnings, and the Unemployment Rate.
