5 Big Financial Market Events to Watch this Week: The Fed’s Favorite Inflation & More

© Reuters 5 big things to know in financial markets this week: The Fed’s favorite inflation data is about to be released

Investing.com – As 2023 comes to an end, Federal Reserve Chairman Jerome Powell hinted that monetary tightening is likely to be over, and discussions about interest rate cuts are about to “come into view.” At the same time, investors will receive the last batch of U.S. inflation data this year this week, which is also the Fed’s favorite inflation measure. The Bank of Japan will hold a monetary policy meeting this week, and whether it will turn hawkish is highly anticipated.

Here are five major financial market events to watch this week:

1.The Fed’s favorite inflationdataAnnouncement coming soon

This Friday (22nd), the United States will release the PCE price index. This data is the Federal Reserve’s main indicator for measuring inflation and is also the last batch of major inflation data this year.

Economists expect that the PCE price index will remain at 0.2% for the second consecutive month in November, while the core indicator, which excludes fluctuations in food and energy costs, will reach 2.0% on a monthly basis.

In addition, property market data such as , , and data will also be released this week.

Atlanta Fed President Raphael Bostic will deliver a speech on Tuesday (19th).

2.ChristmasWill an uptrend occur?？

Last Friday (15th), it reached a new closing high, with little change at the closing, but rose for the seventh consecutive week, setting a record for the longest consecutive weekly rise since 2017.

Kim Forrest, chief investment officer at Bokeh Capital Partners, commented, “I think what we got this week is that (Federal Reserve Chairman Powell) does not want to overly punish the economy and keep (interest rates) higher for no reason for longer.”

“I don’t know if we’re going to have a Christmas rally, but all things considered, it seems like we might have one.”

However, some investor optimism was dampened when New York Fed President John Williams said on Friday it was too early to talk about cutting interest rates.

3.The Bank of Japan is gradually moving towardsSteering?

Contrary to the Fed and other major central banks turning to when to start cutting interest rates, expectations are growing that the Bank of Japan may end negative interest rates in the coming months.

The Bank of Japan will hold its meeting on Tuesday. Although it is unlikely to change its stance immediately, investors need to carefully study the Bank of Japan’s monetary policy statement for any signs of a possible shift at the next meeting in January.

The exchange rate returned to strong levels of 141 yen per dollar for the first time since July, amid concerns that the Bank of Japan might turn and the Federal Reserve turned dovish.

Bank of Japan Governor Kazuo Ueda said last week that the Bank of Japan will face a more challenging situation at the end of the year and early 2024, that is, it will become more difficult to formulate monetary policy. In addition, he mentioned that there are various options for adjusting the policy rate if interest rates are raised, including maintaining the interest rate applied to reserves and adjusting the overnight lending rate.

4.Gold is expected to materialize2020first annual rise since

Gold prices are on track to rise for the first time since 2020, driven by a weaker U.S. dollar and growing expectations for an interest rate cut in 2024. The prospect of lower interest rates increases the appeal of holding precious metals.

Real U.S. yields have been rising since the start of 2022, only turning positive in June, while gold has retreated from near-record levels.

Currently, real yields have reached their highest point in eight years, but this has not prevented gold from jumping to levels above $2,000. However, gold prices are still about 20% below their inflation-adjusted all-time high of $2,500 in 1980.

While investors are hoping for a series of interest rate cuts next year, political and economic uncertainty is rising, which indicates that gold investors may be entering a sweet period.

5.China will announceLPR，U.K.Will publish inflationdata

China will announce the LPR interest rate on Wednesday (20th), and analysts generally expect it to remain unchanged.

Zhou Maohua, a macro researcher at the Financial Markets Department of Everbright Bank, said that the reasons include: on the one hand, the People’s Bank of China keeps policy interest rates stable, mainly because recent data show that the economy continues to recover, the overall performance of financial data in November is stable, and the credit structure continues to be optimized, reflecting the current domestic interest rates. The overall level is within a reasonable range; at the same time, the domestic People’s Bank of China policy also fully considers the practical problem of high net interest margin pressure on some banks.

On the same day, the UK will announce the latest reading. The current reading is more than twice the Bank of England’s 2% target. Compared with other major economies, the UK’s price pressure is still greater.

It hit a three-month high against the euro this month after euro zone inflation fell sharply, fueling speculation that the Bank of England will take longer to cut interest rates than the European Central Bank.

However, high interest rates may also plunge the British economy intodecline, the Bank of England expects the British economy to be flat in 2024, which means that a stronger pound is not a one-way bet. The fate of the pound depends on whether the Bank of England continues to react to current inflationary trends or takes a longer-term view that economic weakness will depress wages and prices.

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