The Global Markets Hold Steady Amid Anticipation of Key Economic Data Releases
The pound maintained its stability against the dollar on Tuesday, trading just above the flatline at $1.2746 as investors awaited crucial US inflation data for November, set to be released on Wednesday. Economists are anticipating a slight acceleration in annual headline Consumer Price Index (CPI) to 2.7%, up from 2.6% in October, while core CPI is expected to rise by a steady 3.3%. On a month-on-month basis, both headline and core inflation are forecasted to grow by 0.2% and 0.3%, respectively.
Key Drivers of Market Sentiment
Unless the figures deviate markedly from expectations, analysts do not foresee a significant shift in market sentiment regarding the Federal Reserve's policy outlook. The consensus is that the Fed will proceed with a 25 basis point rate cut at its upcoming meeting on 18 December, bringing rates to a range of 4.25%-4.50%. According to the CME FedWatch tool, there is a nearly 90% probability of this outcome.
Meanwhile, sterling was little changed against the euro (GBPEUR=X), trading at €1.2083 ahead of the European Central Bank's rate decision on Thursday. The market is closely watching the developments in both the US and Europe, as the interest rate decisions have significant implications for global economic growth and market sentiment.
Gold Prices Continue to Rise
Gold prices extended their gains on Tuesday, buoyed by China's pledge to enhance policy stimulus in a bid to bolster economic growth, as investors also awaited US inflation data for clues on the Federal Reserve's interest rate strategy. Spot gold rose 0.7%, trading at $2,663.70 per ounce, while US gold futures increased by 0.1%, reaching $2,666.30 at the time of writing.
Gold had reached a two-week high on Monday, supported by the resumption of gold purchases by China's central bank after a six-month hiatus. China's commitment to adopting an "appropriately loose monetary policy" next year, alongside a more proactive fiscal policy, has added to the positive outlook for gold. The Politburo has also indicated a shift away from a "prudent" policy stance that has been in place for nearly 14 years.
Kelvin Wong on China's Interest Rate Cuts
According to Kelvin Wong, senior market analyst for Asia Pacific at OANDA, further interest rate cuts in China could lead to increased demand for gold. "Secondly, the safe-haven demand narrative has resurfaced as China has started a probe into the US AI juggernaut Nvidia (NVDA) over an alleged violation of anti-monopoly law, suggesting more tit-for-tat measures may arise between the US and China," Wong said.
Geopolitical Concerns Drive Safe-Haven Buying
Meanwhile, geopolitical concerns in the Middle East, particularly the collapse of Syrian president Bashar al-Assad's regime, have sparked further safe-haven buying of gold and silver. The ongoing conflict in Syria has created uncertainty in the region, driving investors to seek safe-haven assets such as gold.
Oil Prices Retreat Amid Weak Demand Outlook
Oil prices retreated on Tuesday after Monday's gains, weighed down by a weak demand outlook following disappointing Chinese international trade data for November. Brent crude futures fell by 0.1%, trading at $72.05 per barrel, while US West Texas Intermediate (WTI) hovered just below the flatline at $68.32 per barrel at the time of writing.
China's exports increased by 6.7% and imports declined by 3.9% in November, both of which were below economists' expectations. In addition, China reported a weaker-than-expected consumer price index (CPI) on Monday, in yet another sign of continued sluggish domestic demand.
Market Strategists Weigh in on Oil Prices
Despite market optimism surrounding potential policy stimulus from Beijing, oil price gains may remain limited until there is more clarity on how China's measures will affect the country's crude demand outlook, said IG market strategist Yeap Jun Rong. The market is also eyeing the possibility of a rate cut by the US Federal Reserve, which could stimulate oil demand in the world's largest economy.
Oil Markets and Demand
As Priyanka Sachdeva, senior market analyst at Phillip Nova, noted: "Oil markets have been a function of demand more than supply-side narratives this year. As a result, investors are hesitant to take speculative positions in oil ahead of key policy decisions from the Fed." The market is closely watching the developments in both China and the US, as their policies have significant implications for global economic growth and market sentiment.
Global Market Movements
In broader market movements, the FTSE 100 (^FTSE) opened lower, losing 0.5% to 8,313.17 points. For more details, check our live coverage here. The global markets are holding steady amid anticipation of key economic data releases, with investors closely watching the developments in both China and the US.
Conclusion
The pound held steady against the dollar on Tuesday, trading just above the flatline at $1.2746 as investors awaited crucial US inflation data for November. Gold prices continued to rise, buoyed by China's pledge to enhance policy stimulus in a bid to bolster economic growth. Oil prices retreated amid a weak demand outlook following disappointing Chinese international trade data for November.
The market is closely watching the developments in both China and the US, as their policies have significant implications for global economic growth and market sentiment. The consensus is that the Fed will proceed with a 25 basis point rate cut at its upcoming meeting on 18 December, bringing rates to a range of 4.25%-4.50%. According to the CME FedWatch tool, there is a nearly 90% probability of this outcome.
The global markets are holding steady amid anticipation of key economic data releases, with investors closely watching the developments in both China and the US. The market sentiment will likely remain uncertain until there is more clarity on how these policies will affect the country's crude demand outlook.