25 Nov 2024 - Markets brace for a pivotal week with Trump's Treasury nominee Bessent signaling hawkish fiscal policy while favoring gradual tariff implementation. The Fed's PCE data and FOMC minutes will guide rate cut expectations, as gold retreats despite geopolitical tensions. China maintains steady rates while preparing for potential trade impacts under Trump's administration.
Day | Time (UTC) | Event |
Tuesday | 22:00 | US Housing Price Index (Sep) |
Tuesday | 23:00 | US Consumer Confidence (Nov) |
Tuesday | 23:00 | US New Home Sales Change (Oct) |
Wednesday | 03:00 | US FOMC Minutes |
Wednesday | 08:30 | Australia Monthly Consumer Price Index (Oct) |
Wednesday | 21:30 | US PCE Price Index (Oct) |
Wednesday | 21:30 | US Durable Goods Orders (Oct) |
Wednesday | 21:30 | US Gross Domestic Product (Q3) PREL |
Wednesday | 21:30 | US Personal Income (Oct) |
Wednesday | 21:30 | US Personal Spending (Oct) |
Wednesday | 23:00 | US Pending Home Sales (Oct) |
Thursday | 18:00 | Eurozone Consumer Confidence (Nov) |
Thursday | 21:00 | Germany Consumer Price Index (Nov) PREL |
Friday | 07:30 | Japan Tokyo Consumer Price Index (Nov) |
Friday | 07:30 | Japan Unemployment Rate (Oct) |
Friday | 07:30 | Japan Industrial Production (Oct) PREL |
Friday | 07:30 | Japan Retail Trade (Oct) |
Friday | 15:00 | Germany Retail Sales (Oct) |
Friday | 18:00 | Eurozone H. Index of Consumer Prices (Nov) |
Fed Policy and Trump’s Economic Agenda: A Delicate Balance
As President-elect Donald Trump continues to form his administration, he is simultaneously shaping global sentiment and prompting a reassessment of expectations regarding the U.S. economy and the Federal Reserve's policy trajectory.
On Friday, Trump nominated hedge fund executive Scott Bessent as the next Treasury Secretary. If confirmed by the Senate, Bessent will wield broad authority over public finance, economic sanctions, international economic diplomacy, and the functioning of financial markets.
Based on Bessent's previous statements about policies likely to affect the U.S. economy, many market observers have expressed optimism about his leadership's potential impact on the economy and markets. While Bessent is expected to adopt a fiscally hawkish stance, he is also anticipated to advocate for a phased approach to Trump's promised tariff policies.
Following the announcement of Bessent's nomination, which is expected to prioritize economic and market stability over radical measures, the U.S. dollar stabilized after experiencing its steepest decline in over two weeks. Meanwhile, U.S. Treasury yields, which had surged sharply since mid-September to reach 4.5%, eased back to 4.33%.
As Trump continues to assemble his potential administration, political expectations remain in flux. However, concerns over the possible effects of his proposed tax and tariff policies persist. Widespread sentiment suggests that global trade tensions will escalate after Trump takes office in the next year. The uncertainty stemming from these expectations continues to provide tailwinds for the U.S. dollar.
According to Bloomberg Markets Live Pulse’s latest survey, the dollar is expected to enter 2025 on solid footing before facing risks of faster inflation and rising fiscal deficits in the coming year. Meanwhile, emerging market assets, particularly in countries like China, which are likely to feel the brunt of Trump’s policies, remain under pressure from the strong dollar.
Participants in the Bloomberg survey expect Trump’s policies to boost the dollar in the short term but slow economic growth and diminish the currency’s appeal in the long run. Among the 89 survey respondents, 38% identified fiscal deficits as the biggest threat to the dollar, while 32% pointed to high tariffs. Other concerns included higher inflation undermining real yields and increased political pressure on the Federal Reserve.
On the other hand, there is growing consensus that anticipated policy changes could halt the decline in stubborn U.S. inflation and force the Fed to slow down rate cuts. The Fed’s preferred inflation gauge, set to be released this Wednesday, will play a critical role in shaping these expectations.
According to another Bloomberg survey, economists expect the Personal Consumption Expenditures (PCE) price index to run higher next year compared to last month’s survey results. The so-called core PCE price index, which excludes volatile food and energy costs, 25th November 2024 is projected to rise by an average of 2.3% in 2025, slightly above last month’s forecast of 2.2%.
For October’s report, due Wednesday, the core PCE price index is expected to increase by 0.3% month-on month and 2.8% year-on-year, marking the largest annual gain since April.
While recent statements from some Fed officials suggest they are unperturbed by inflation volatility, others, including Chair Powell, have indicated they are in no rush to cut rates. This has added uncertainty to the outcome of the December meeting. Swaps market data currently price in a 55.9% chance of a quarter point rate cut next month.
On Tuesday, traders will scrutinize the minutes of the Fed’s November policy meeting for clues about policymakers’ appetite for a third consecutive rate cut next month. Wednesday, ahead of the U.S. Thanksgiving holiday, markets will face a barrage of economic data, including the PCE price index, third quarter GDP estimates, income and spending figures, durable goods orders, and jobless claims.
As long as the U.S. labor market remains resilient and inflation proves sticky, expectations for slower rate cuts from the Fed are likely to intensify, potentially further strengthening the U.S. dollar.
Gold Markets: Balancing Economic Signals and Geopolitical Risks
Gold prices, which surged nearly 6% last week to record their highest weekly gain in 20 months, retreated below $2,700 per ounce despite a slightly weaker U.S. dollar and declining Treasury yields. Expectations for a stronger U.S. dollar under the Trump administration, coupled with robust U.S. economic data, have fueled speculation that the Fed will ease rates more gradually in the coming period.
Economists surveyed by Bloomberg predict the federal funds rate will decline to a range of 3.25% to 3.5% in 2025, roughly 1 percentage point higher than pre election forecasts and a quarter-point higher than last month’s survey. Higher interest rates are typically negative for precious metals.
A series of economic data this week could offer further insights into the Fed’s likely policy path. Any upside surprise in the PCE price index, the Fed’s preferred measure of inflation, could increase bets that rates will be left unchanged in December, potentially putting additional pressure on precious metals.
On the other hand, many banks maintain a positive long-term outlook for gold. Trump’s proposed policies are expected to weigh on the U.S. economy and the dollar in the long run, which is positive for precious metals. While these expectations are longer-term, they could trigger buying at lower price levels, limiting downside movements in gold prices.
Moreover, escalating tensions between Russia and Ukraine and ongoing risks in the Middle East will remain critical in shaping the short-term direction of precious metals. Israeli Prime Minister Benjamin Netanyahu reaffirmed his commitment to continuing the war against Hamas after the International Criminal Court issued arrest warrants for him and a former minister.
Similarly, Russian President Vladimir Putin signaled continued aggression against Ukraine. Should geopolitical tensions intensify, safe-haven demand could rise, providing support for precious metals.
China Balances Stimulus and Trade War Uncertainty
In recent months, traders have been closely monitoring China’s efforts to support its economy through its most aggressive stimulus measures since the pandemic. However, as authorities remain patient in boosting monetary stimulus, the country’s central bank has kept its policy lending rate unchanged for two consecutive months following the last cut in September.
On Monday, the People’s Bank of China announced that it would maintain the one-year medium-term lending facility rate at 2%. According to Goldman Sachs Group Inc., given the strong dollar and tariff risks, Asian central banks are likely to remain cautious about further policy easing.
Meanwhile, economists predict that Chinese exports will hit a historic high this year, spurred by frontloading of orders ahead of Trump’s promised tariffs on Chinese goods. According to the median forecast of economists surveyed by Bloomberg, Chinese exports are expected to grow by 7% year-on-year in the fourth quarter. This could enable China’s economy to expand by 4.9% during the same period.
However, a potential trade war with the U.S. next year continues to threaten Beijing’s growth targets. If the anticipated tariffs are implemented, the Chinese government may be forced to introduce additional measures to stimulate domestic demand and support economic growth.
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