Economic Indicators Schedule

Tuesday

• 08:30 (UTC) – Australia: RBA Meeting Minutes

• 18:00 (UTC) – Eurozone: Harmonized Index of Consumer Prices

• 21:30 (UTC) – US: Housing Starts

Wednesday

• 15:00 (UTC) – UK: Consumer Price Index

• 15:00 (UTC) – UK: Producer Price Index

• 21:30 (UTC) – US: Continuing Jobless Claims

Thursday

• 22:45 (UTC) – US: S&P Global Manufacturing PMI (PREL)

• 22:45 (UTC) – US: S&P Global Services PMI (PREL)

• 23:00 (UTC) – Eurozone: Consumer Confidence (PREL)

• 23:00 (UTC) – US: Existing Home Sales

Friday

• 06:00 (UTC) – Australia: Judo Bank Composite PMI (PREL)

• 07:30 (UTC) – Japan: National Consumer Price Index

• 15:00 (UTC) – Germany: Gross Domestic Product

• 15:00 (UTC) – UK: Retail Sales

• 17:00 (UTC) – Eurozone: HCOB Composite PMI (PREL)

• 17:30 (UTC) – UK: S&P Global/CIPS Composite PMI (PREL)

• 23:00 (UTC) – US: Michigan Consumer Sentiment Index

• 23:00 (UTC) – US: Consumer Inflation Expectation

Market Volatility Post-Election: Inflation and Rate Cut Uncertainties Loom

Two weeks after the U.S. elections, the "Trump trade" has somewhat pulled back, while last week’s data from the U.S. raised doubts about whether the Federal Reserve will lower interest rates again next month.

There are no significant signs of a slowdown in consumer spending in the U.S., and inflation remains persistently sticky. A report released on Wednesday by the U.S. Bureau of Labor Statistics showed that so called core inflation, which excludes food and energy costs, rose by 0.3% for the third consecutive month, keeping the annual increase steady at 3.3%.

Although inflation in the U.S. has eased significantly over the past two years, recent data indicates that progress has stalled, highlighting the challenges faced by Fed policymakers.

On the other hand, another report published on Friday showed that consumer spending continued to rise at a solid pace in October, increasing by 0.4%, following an upward revision of the previous month's increase to 0.8%. A closer look at the subcategories paints a more mixed picture.

The rise in consumer spending was bolstered by increased automobile purchases, while sales excluding automobiles rose by just 0.1%. This suggests that the surge in car demand likely reflects the impact of recent hurricanes. Lastly, the control group, often seen as a more accurate measure of inflation, registered a 0.1% decline.

Some economists caution that the tariff policies expected under Donald Trump’s administration could lead certain retailers to raise prices. Since retail sales data is not adjusted for inflation, upcoming reports may reflect price increases rather than genuine demand growth. Nevertheless, the upward revisions in previous sales data underscore that consumers entered the final quarter of the year with strong demand.

On Friday, the 10-year benchmark U.S. Treasury yields fell to 4.43% just hours after reaching 4.5%, while U.S. equities gave back a significant portion of their post-election gains. The broad S&P 500 index dropped 2.2% over the week, while the tech-heavy Nasdaq 100 fell 2.5%, surrendering more than half of its election related gains. Meanwhile, the U.S. dollar maintained its post-election strength amid growing doubts about further Fed rate cuts, and although precious metals recovered some of their losses, they remained under pressure.

Amid expectations that the policies anticipated under the Trump administration will limit the Fed’s extent for rate cuts next year, recent inflation data has raised doubts about whether the Fed will proceed with a rate cut at its December meeting. Last week, Fed Chair Jerome Powell signaled that the central bank was in no rush to cut rates, adding to this uncertainty.

Similarly, remarks from a handful of Fed officials were cautious, with some expressing confidence in the progress on inflation, further contributing to the confusion surrounding a potential rate cut in December.

According to futures market data, the likelihood of a quarter-point rate cut by the Fed next month is pricing at 65.3%. Moreover, there is growing speculation about a slower pace of easing beyond January. Swap contracts reveal that traders anticipate approximately 74 basis points of easing by December next year, which is more than 100 basis points lower than pre election expectations.

As rate cut expectations dwindle, the U.S. dollar is likely to continue strengthening. Traders will closely watch the U.S. economic calendar this week, along with comments from several Fed officials, for further clues.

Gold Prices Stabilize After Steep Declines Post Election Shock

Precious metals are recovering some of their losses after suffering their worst weekly decline since 2021, fueled by speculation about Donald Trump’s return to the White House and growing expectations of slower rate cuts by the Federal Reserve.

Gold prices have plunged nearly 7% since the U.S. elections, while silver has fallen 5%. Losses in other precious metals, however, have remained relatively modest. According to Deutsche Bank, gold's performance following Trump’s victory marks the worst in at least 13 U.S. presidential election cycles. Bets on higher U.S. inflation and interest rates under Trump’s administration have bolstered the dollar, increasing the opportunity cost of holding precious metals and pressuring their prices.

Despite recent declines, gold's underlying supportive factors have not vanished, and forecasts for the coming year remain bullish. Analysts predict that higher U.S. inflation could drive investors back to gold as a hedge. Goldman Sachs anticipates gold prices could reach $3,000 per ounce, supported by strong central bank purchases and the Fed's anticipated, albeit gradual, rate cuts.

Additionally, the potential for heightened trade and geopolitical tensions under Trump’s administration is another factor boosting gold’s long-term appeal. Economists suggest that such risks could encourage reserve managers in many countries to reduce reliance on the dollar and increase gold purchases. Besides, perceived risks could drive retail investors to seek safe-haven assets, further boosting demand for gold.

On the other hand, the steep drop in gold prices since the U.S. elections has brought them to a more "attractive" level, which could be seen as a buying opportunity. This correction might entice some capital to flow back from stock markets. However, with Treasury yields remaining high and risk appetite still elevated, reversing the current momentum may prove challenging in the near term.

Geopolitical Risks and Demand Woes Shape Oil Markets

Oil prices rose amid increasing risk appetite and geopolitical tensions but remained under pressure due to concerns about China’s demand outlook and abundant global supply. After falling nearly 5% last week, West Texas Intermediate (WTI) crude oil opened the new week with gains, climbing above $67 per barrel.

While the conflict between Ukraine and Russia continues, developments in the Middle East are also being closely monitored. These factors keep the possibility of disrupted oil supply on the agenda, contributing to price fluctuations with geopolitical risk premiums. Over the weekend, tensions between Russia and Ukraine escalated slightly. However, traders weighed new President Trump's promise to swiftly end the war upon taking office, limiting the impact on prices.

On the other hand, ongoing challenges in the Chinese economy keep demand concerns alive. Many market observers, including the International Energy Agency (IEA), foresee a significant supply surplus in the near future. Unless a major supply-restricting event occurs, this scenario is likely to support the downward trend in oil prices.

China’s Economic Challenges Deepen After Trump’s Win

Despite a flurry of stimulus measures, expectations for China's struggling economy have grown more pessimistic following Trump’s victory. The yuan depreciated by 1.7% against the US dollar, while the MSCI China Index has dropped nearly 15% from its recent peak as enthusiasm for further government support fades and concerns over higher tariffs intensify.

Wall Street brokerages are reducing their weightings on Chinese stocks and forecasting further declines in the yuan. Analysts predict the yuan could lose up to 10% of its value against the dollar by 2025, potentially breaking its 17-year low.

Meanwhile, Chinese government officials have warned that Beijing will retaliate if Trump follows through on his promise to impose a 60% tariff. This signals an escalation in trade tensions in the coming period. Such friction between the world’s two largest economies is poised to negatively impact global sentiment, making the outlook increasingly uncertain.