Some money off the table

All asset classes experienced moderate profit taking this week. US equities, US equity funds, US Treasuries, Emerging Markets debt and equities. European, Japanese and Korean equities were largely stable. The Indian stock market hit Lifetime highs. Chinese markets continue to remain in extreme risk off mode. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq closed flat but in the green.

Treasury yields hold

The US 2-Year and the 10-Year yields were range bound this week. Additionally, the yield curve is getting close to steepening again. Fed’s favorite inflation gauge looms showed modest decline for the November month. A more dovish tone from the Federal Reserve at its last meeting has resulted in investors pricing in around 150 basis points of interest rate cuts next year. Sticky inflation is likely to dent these rate-cut expectations.

Precious metals extend gains

Rate cut expectations and “no recession” sentiment augurs well for precious metals. Spot Gold gained 1.6% this week to close at $2052. While Silver futures closed up 1.7% at $24.565.

Dollar in downtrend

Following the Fed’s hint at potential interest rate cuts, prompting a shift in investor sentiment. The Dollar index plummeted below 102 and closed this week at 101.71 with a decline of 0.80%.

EUR/USD continues uptrend

Despite facing consistent challenges from Eurozone economic data, the EUR/USD pair has shown a Q4 rebound. The pair is up 1.06% against the dollar this week. The ongoing bullish sentiment in EUR/USD is coupled with the declining US dollar.

USD/JPY stable

Initially this week, the dollar rose against the yen on Tuesday after the Bank of Japan kept rates steady.. The USD/JPY hit a high of 144.96. Thereafter the U.S. dollar has been broadly softer against the yen and also against other majors, weighed down by expectations for interest rate cuts next year. The pair closed to 142.41 per dollar, a modest gain of 0.18% this week. The pair displayed stability this week stable after BOJ kept its ultra-low interest rates unchanged and maintained its dovish policy guidance.

USD/GBP flat

USD/GBP continued to be range bound this week and closed mildly lower by 0.16%. For the last four weeks, the big range boundaries have been 0.80 on the upside and 0.7850 on the downside. In the UK, higher-than-targeted inflation raises uncertainty about rate adjustments by the Bank of England (BoE). Sterling’s recent strength against the dollar follows expectations of three rate cuts by the Fed in 2024. However, the mixed PMI reports in the UK reveal manufacturing contraction but a stronger services sector.

Crude bulls relieved

WTI crude oil futures surged above $70 to close this week at $73.49 with a gain of 2.88% due to the “no recession” outlook in the US. OPEC’s production cuts haven’t been enough to stop the steep decline. However crude bulls got a leg up due to increased tensions in the Red Sea. Overall, the oil market is not exactly bullish. Future market price projections remain uncertain. Potential for the rebound to continue depends on OPEC+ adherence to production quotas.

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