Financial Market Indicators: U.S. Markets, Dollar Index, and Gold
Below is an overview of recent movements in key market indicators and their interrelations, influenced by economic data and Federal Reserve decisions.
1. S&P 500 Index:
Investors expect the S&P 500 to reach 6,500–6,900 points by the end of 2025. However, in a bearish scenario, it could fall to 5,100 points.
The continuation of a stable economic environment without significant fluctuations, i.e., the absence of traditional economic slowdowns or recoveries, supported by the Federal Reserve’s commitment to backing the economy.
Factors such as a “soft landing,” advancements in artificial intelligence, and policies of President-elect Donald Trump may impact the market. While policies like tariff impositions might negatively affect short-term profits, deregulation and tax reforms could boost long-term economic growth.
Technical Analysis: As long as the S&P 500 trades above the critical support level of 5,865 points, the current upward trend is expected to continue.
2. Gold:
Gold prices rose at the beginning of last week, supported by growing concerns over political unrest in Syria and South Korea. These geopolitical fears bolstered demand for gold as a safe haven. However, by the end of the trading week, gold prices reversed all gains, with the ounce closing near $2,650.
Despite ongoing expectations of a 25-basis-point interest rate cut by the Federal Reserve next week, the bank’s long-term policies remain uncertain. This could lead to a more cautious monetary easing approach in 2025.
On another front, Chinese economic data showed greater-than-expected consumer price contractions in November, along with producer prices shrinking for the 25th consecutive month. Despite Beijing’s stimulus measures, clear signs of economic recovery remain absent, putting pressure on global commodity markets.
Technical Analysis: As long as gold trades above the key support range of $2,560–$2,535, the current upward trend will remain intact.
3. U.S. Dollar Index:
Inflation rates rose by 2.7% year-over-year in November, primarily driven by increases in housing and food costs. This marks the second consecutive monthly rise. However, the uncertainty surrounding economic policies under President-elect Trump may influence inflation in 2025.
Investors believe there is a strong likelihood that the Federal Reserve will cut interest rates by 0.25% during its upcoming meeting on December 17–18, with greater focus on economic forecasts for 2025.
While inflation has not improved significantly, some components have shifted. Housing cost increases have slowed, and the core Personal Consumption Expenditures (PCE) Price Index stands at 0.3%, expected to decline to 0.2%—the metric used by the Federal Reserve to measure progress toward its 2% inflation target.
On another note, the labor market remains a key surprise, with unemployment rising slightly since the Federal Reserve began significant rate hikes in March 2022 but still standing at 4.2%—below the long-term national average and near what Federal Reserve officials consider “full employment.”
Technical Analysis: The U.S. Dollar Index is trading within a range. If it breaks the critical resistance level of 107.20, the range will transition into an upward trend.
4. Inflation in the UK: Analysis and Central Bank Projections:
Inflation in the United Kingdom is rising again, with the core Consumer Price Index (CPI) expected to reach 2.7% in November, up from 2.3% in October, while core inflation remains at 3.8%. The UK economy contracted by 0.1% in October, marking two consecutive months of contraction, with rising energy costs, influenced by global demand, driving inflation.
In its previous meeting, the Bank of England reduced interest rates from 5% to 4.75%. It is expected to keep rates unchanged in its upcoming meeting while preparing for a new easing cycle next year.
Technical Analysis: The GBP/USD pair is trading within a range between the support level of 1.2490 and the resistance level of 1.2950.
5. Bank of Japan’s Upcoming Interest Rate Decision:
The Bank of Japan is likely to keep interest rates unchanged in its upcoming meeting, citing global risks and wage growth expectations for 2024. While some officials believe conditions are suitable for a rate hike, others prefer to wait for more data on the impact of wage growth on inflation.
The monetary policy meeting will take place on December 18–19, following the Federal Reserve’s meeting. If the Fed decides to hold rates steady, boosting the dollar, the Bank of Japan may need to take measures to support the yen. With no significant inflationary pressures, the bank remains cautious about raising interest rates.
The Bank focuses on 2024 wage negotiations, with expectations to raise interest rates to 0.5% by the end of March. Global economic shifts, particularly Trump’s return to the presidency, add further uncertainty. Currently, markets suggest less than a 30% probability of a rate hike in December.
