Stocks Remain Bid into the Last Weeks of the Year
US stock markets had a mixed day on Friday but remain bid as we move into the last two trading weeks of the year, however some investors are looking at how much further they can go on the Fed’s recent pivot. An air of caution hit the markets on Friday as the New York Federal Reserve President John Williams reiterated that the Fed remains focused on seeing a 2% inflation level, this led to a drop in some indices and a rally in the dollar. The major indices closed mixed, the Dow up 0.15%, the S&P flat and the Nasdaq up 0.35%. The dollar gained back some of its lost ground, the dollar index climbing 0.56% and US treasury yields trimmed some of their losses. Oil and Gold both dropped back a touch from previous days highs.
FX Traders Look for Fresh Trends into the New Year
FX traders had a plethora of central bank updates to work through last week and the highlight was clearly the pivot from the Federal Reserve Bank, however updates from some of the other banks may well see better trending trade opportunities into the new year. Already we have seen some pull back by the Fed, when the New York President John Williams reminded that market that the 2% inflation target is still very much the major focus and traders are expecting to see more fluctuations as we move into the more illiquid trading conditions of holiday markets. Other central banks last week remained more on the hawkish side of things and this could lead to some solid interest rate differential trends against the dollar and on the crosses into the new year.
Quiet Start on the Economic Calendar for the Week
Once again it looks like being a relatively quiet start to the week in terms of the economic calendar today with just a few events to divert investors from recent trends. There is little of note in the Asian session, but the German Ifo Business Climate data and a speech from the MPC’s Broadbent could see some moves once Europe opens. Fixed interest markets will be paying close attention to the US 10-year bond auction results to towards the end of the New York session especially given the recent moves post last weeks Fed meeting. Traders are expecting to see markets kick off within recent ranges but will be aware that liquidity can be an issue in the week leading up to the Christmas holiday season and will trade accordingly.
