Market Drivers; US Session

Central Banks Hold Steady, US Core PCE in Focus

The Bank of England and the Bank of Japan both held interest rates steady at their respective policy meetings. While the BoE’s decision had a limited impact on the Pound, the BoJ’s rate hold weighed heavily on the Yen.

With a relatively quiet economic calendar next week, the release of the US Core Personal Consumption Expenditures (PCE) Price Index on Friday will be the key market event. Trading activity is expected to diminish as the holiday season approaches, leading to thinner liquidity conditions.

The US Dollar continued its strong rally, with the US Dollar Index (DXY) surpassing the 108.00 level and reaching a high of 108.40, marking a weekly gain of 1.37%. This strength was driven by the Federal Reserve’s less dovish stance on future rate cuts. The US 10-year Treasury yield also surged, climbing 3.84% weekly and breaking through strong resistance at the 4.50% level.

The Pound Sterling initially gained ground after the BoE’s rate decision but subsequently weakened, falling towards the 1.2500 level. The Yen depreciated significantly against the Dollar after the BoJ maintained its ultra-loose monetary policy.

Other notable currency movements include a decline in the Euro, a recovery in the Australian Dollar, and a sharp drop in the New Zealand Dollar due to disappointing economic data.

Gold prices saw modest gains, supported by geopolitical concerns and the potential for a US government shutdown.

Looking ahead, key economic data releases include Japan’s inflation figures, Germany’s Producer Price Index, UK Retail Sales, Canadian Retail Sales, and the US Core PCE Price Index, which will be closely watched by market participants.