Last week, a significant drop in US yields occurred, triggered by lower-than-expected U.S. inflation data and a surge in U.S. jobless claims. This development, signaling reduced chances of additional monetary tightening by the U.S. central bank, allowed traders to factor in more aggressive rate cuts for the upcoming year.
The decline in US yields had a positive impact on stocks, driving the Nasdaq 100 close to its July peak and potentially setting the stage for a bullish breakout. The broader U.S. dollar faced a substantial 2% decline, with the DXY index nearing its lowest level since early September. In response, EUR/USD surpassed its 200-day simple moving average, closing at its highest level in nearly three months.
Fluctuations have Affected the Market:
Gold (XAU/USD) benefited from falling rates and a weakened U.S. dollar, surging over 2.0% for the week and nearing the psychological $2000 mark. Silver prices also experienced a notable 7% increase, although they struggled to breach a crucial resistance near $24.00. In contrast, oil (WTI) faced its fourth consecutive weekly decline, settling at its lowest point since mid-July. Analysts emphasize monitoring short-term crude price movements for potential signs of subdued demand growth and recession fears.
Looking forward, the U.S. economic calendar is relatively quiet due to the Thanksgiving holiday, potentially leading to a consolidation of recent market shifts. This could pave the way for further declines in US yields and the U.S. dollar, offering potential upside for precious metals and risk assets.
A Downfall of the Markets:
For a more in-depth analysis of upcoming market catalysts and potential volatility, explore the detailed forecasts compiled by the DailyFX team. The notable drop in US yields last week, driven by a combination of lower-than-expected U.S. inflation data and an increase in U.S. jobless claims, has had far-reaching implications across various financial markets. This downturn in US yields, coupled with the diminishing likelihood of additional monetary tightening by the U.S. central bank, provided traders with the green light to factor in more aggressive rate cuts for the next year.
Equity markets experienced a positive boost, with the Nasdaq 100 approaching its July high and potentially on the cusp of a bullish breakout. The broad decline in the U.S. dollar, registering a significant 2% drop and bringing the DXY index close to its lowest level since early September, underscored the impact of the shifting yield dynamics. Meanwhile, the EUR/USD pair made a noteworthy move, surging past its 200-day simple moving average and closing at its highest level in almost three months.
