The US Dollar Index experienced fluctuations, hovering between gains and losses as market participants eagerly awaited signs of potential moderation in US inflation. Despite strong inflation figures, the dollar retreated below 102.2, as rate cut expectations remained largely unchanged.
COMEX Gold prices rebounded from a low of $2017 per troy ounce after the US inflation release. Gold prices ended the week flat due to a cooler-than-expected producer inflation print in the US, sparking speculation of earlier monetary easing by the Federal Reserve.
US producer prices unexpectedly declined in December 2023, contrary to market projections. The yearly increase of 1 percent fell short of the anticipated 1.3 percent growth, instilling hope for a gradual convergence of inflation towards the Federal Reserve’s target.
WTI Crude experienced a significant rebound from $70.13 to $75.25 a barrel, settling 1 percent higher near $72.68 a barrel. Strikes against Houthi targets in Yemen reintroduced war risk premium, supporting crude oil prices amid concerns about disruptions in the Middle East.
Most base metals on the LME hit one-month lows due to concerns about global manufacturing and construction activity. Market anxieties increased with the World Bank’s forecast of a global growth slowdown in 2024, coupled with China’s economic growth slowing to 4.5 percent.
Looking ahead, markets will focus on upcoming US retail sales data and FOMC officials’ speeches. The interest rate outlook remains uncertain, and a robust performance in December’s retail sales could impact the Fed’s approach, potentially reducing the urgency for rate cuts.
Moreover, a third consecutive monthly decline in China’s CPI in December raises expectations of the People’s Bank of China cutting rates. Speculation about a reduction in the required reserve amount for banks is also present, indicating potential calls for stimulus amid signs of deflation and weak domestic demand.
