Final Trades for December start here!
Last week's month-end-flows provided a much welcomed relief rally for equity bulls. Jerome Powell signaled a slow down in rate hikes for the December meeting but maintained a, now familiar, hawkish tone. The market lifted the offers by nearly 4% on the session helping the S&P 500 print its first back to back monthly gains in 12 months.
Now, Powell may still be talking ‘confidence’ but with a move like that, the market sent a very clear 4 worded message - We don’t believe you!
We’ve now entered the last active trading period of the year. The market's dovish reaction to Powell's speech and an NFP print well above market expectations means it's going to be a busy end to the year. After a record breaking quarter many investors will be looking to take a much needed break over Christmas before formulating plans for 2023. But not so fast - we ain’t there yet, and every major Central Bank is bookmarked to make one more play for the year over the next two weeks. There are still some business to attend to so let’s dive in and examine the key trading opportunities for the first week of December.
Typically the Monday after NFP is always a subdued affair for both price action and economic data.The start of the week looks like it will follow that pattern however a couple of points stand out. Watch out for EuroArea Retail Sales in the London session and ISM Non-Manufacturing PMIs later on in the US.
Key Market: EURUSD
Traders will have the RBA rate decision to get their teeth into on Tuesday as Philip Lowe is expected to raise rates for the 8th time in a row pushing borrowing costs in Australia to levels we haven’t seen since mid 2013. Lowe said last week that the lags between interest rates and the effects on prices will be longer in this cycle so it will be interesting to factor in any further comments which may sign post an end to the pullback in the Australian Dollar and set up the price action for a move lower into 2023.
Key Market: AUDUSD
Wednesday sees a potential 0.25% interest rate hike from the Bank Of Canada which would see the year out with rates pushing 4%. Tiff Macklem has been the quintessential uber hawk all year and although Canadian Inflation peaked at 8.1% in the summer we’ve flatten around 7% for the last 3 months. Remember the BoC have front loaded rates all year so if there hasn’t been enough of a meaningful impact on inflation it’s fair to say the job isn’t done and the loonie will continue to weaken into the new year providing USDCAD bulls with the perfect bullish pullback to ponder over the Christmas break.
Key Market: USDCAD
Off the back of Friday's NFP, Initial Jobless Claims will print during the US session providing the only meaningful traction in what looks like a light day for economic releases. All jobs data in the US is now critical in understanding where a US recession might be coming from, more importantly - when. Powell has stated the FED is looking for a reduction in jobs creation for a longer period together with higher unemployment to complete the picture of the effects interest rate hikes will have on the US economy. Initial Jobless Claims plays a key role in understanding this picture.
Key Market: S&P 500
We end the week on a potential note of optimism. US PPIs for November are expected to tick up to 0.3%, from a two month flat range of 0.2%. This would indicate a pickup in the sentiment for US industry and would be welcome in all sectors of the business.
High commodity prices have been a real factor across the globe and have dampened growth and production. The war in Ukraine was the curve-ball that set it all off so there is no question that industry will enter the new year with a keen eye for any deterioration in northern Europe. Look for reaction to any extreme prints in the data to be reflected in metals.
Key Market: XAUUSD
Traders have a mixed bag of interest rate hikes, industrial production numbers and trade figures to occupy the first week of December. Remember central banks will all be out in force over the next two weeks to make those final decisions in the hope of ending the year with the right framework for 2023. This is an important time and will offer the final key trades of the year. From there markets will thin out as everyone starts winding down for the Christmas break.
Another great way to stay ahead of the market’s biggest movers and events is to join us in the trading room. Our skilled team of analysts will break down the vital events of the day in real time, along with passing on any relevant trade ideas. Until then, trade well and we’ll see you on our next Live Stream!