27/11/2024
Financial Markets Weekly: Euro Volatility, ECB Policy Outlook, and Geopolitical Impacts
Foreign Exchange Markets
- The Euro (EUR) is expected to trade in a range between 1.0435 and 1.0535. Downward momentum in the currency is slowing, reducing the likelihood of a break below 1.0333 unless significant resistance levels, such as 1.0560, are breached.
- Mixed economic data from the US, including GDP growth estimates and PCE inflation figures, are influencing EUR/USD’s movement. A higher-than-expected core PCE could bolster the USD, while softer readings may support the Euro.
European Economic Outlook
- Economic sentiment in Europe remains subdued amid persistent challenges in the manufacturing sector and heightened political risks, including potential trade tariffs under a second Trump administration. These pressures contribute to increased expectations of monetary easing by the European Central Bank (ECB).
- A 25 basis points (bps) rate cut is widely anticipated next month, with a 58% probability assigned to a more aggressive 50 bps cut. Upcoming Euro Area inflation data is pivotal and will likely shape the ECB’s monetary policy decisions.
Geopolitical Developments and Commodities
- A ceasefire between Israel and Hezbollah has been initiated, reducing immediate geopolitical risks in the Middle East. Oil and gold prices have declined in response, reflecting investor optimism about de-escalating tensions. The Israeli Shekel has strengthened, and credit-default swaps on Israeli government debt have seen reduced demand.
- Despite these positive developments, the broader regional conflict, particularly in Gaza, remains unresolved, with ongoing international efforts to secure lasting peace.
Global Market Implications
- Market participants are closely monitoring data releases in the US, such as initial jobless claims and durable goods orders, alongside inflation data. These figures are expected to influence USD valuation and broader market sentiment.
- In Europe, the focus on inflation and the ECB’s monetary policy stance will play a critical role in shaping near-term currency and equity market movements.
Events
- Thanksgiving Holiday: Observed on Thursday, November 28, 2024, throughout the day, leading to reduced market activity and shortened trading sessions in U.S. markets.Today, due to Thanksgiving, the U.S. markets are closed. On Thanksgiving Day, the stock markets (NYSE and NASDAQ) are shut for the entire day. However, for the remainder of the week, both the stock and bond markets will close early on Friday, November 29th. The stock markets will close at 1:00 PM Eastern Time (EST), and the bond markets will close at 2:00 PM EST.
- Initial Jobless Claims Release (Excepted:215K): Scheduled for Wednesday, November 27, 2024, at 8:30 AM EST, providing a snapshot of labor market conditions ahead of the holiday.
- Durable Goods Orders Release (Expected:-0.8%): Also set for Wednesday, November 27, 2024, at 8:30 AM EST, offering key insights into the manufacturing sector’s health.
- Personal Consumption Expenditures (PCE) Price Index Release (2.8%): Planned for Wednesday, November 27, 2024, at 10 AM EST, this is the Federal Reserve’s preferred gauge for inflation and a critical factor influencing monetary policy decisions.
This summary encapsulates current expectations and risks in the financial markets, emphasizing the interconnectedness of geopolitical, economic, and monetary developments.
IMPORTANT DISCLAIMER
The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.
