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📊 Gold prices retreat slightly, but bullish sentiment prevails Gold (XAU) price dropped by 1.2% on Friday after hitting a five-week high the day before. Despite the decline, prices are still set to rise this week due to anticipated rate cuts by the Federal Reserve (Fed). 👉 Possible effects for traders ‘Gold had an explosive year, and we're getting into the tail end of the year, which might see some unwinding going into the last few weeks, but I think that's going to be short-lived and believe that gold is going to continue to move much higher', said Daniel Pavilonis, senior market strategist at RJO Futures. Indeed, gold has surged towards record highs this year, driven by a looser monetary policy pursued by the Fed and most major central banks worldwide. An additional bullish factor is the rise in safe-haven demand due to geopolitical and economic uncertainty and growing structural purchases by central banks, especially by the People's Bank of Bank (PBOC). Traders now see a 97% chance of a 25-basis-point (bps) rate cut at the Fed's meeting on 17-18 December. However, the outlook for subsequent cuts is rather uncertain. ‘Generally speaking, we see a stronger U.S. economy next year, which should leave less room for rate cuts and should thus bring less tailwinds for gold’, said Carsten Menke, an analyst at Julius Baer. XAUUSD was rising slightly during the Asian and early European trading sessions. Today, investors will focus on Purchasing Managers' Indices (PMIs) reports released by the S&P Global. Arguably, the most impactful release is the U.S. PMI, due at 2:45 p.m. UTC. Higher-than-expected figures may reduce the probability of future rate cuts by the Fed, putting bearish pressure on XAUUSD. Conversely, lower-than-expected results could pull the gold price slightly higher. Key levels to watch are $2,649 and $2,668. ‘Spot gold may retest support at $2,642 per ounce, with a good chance of breaking below this level and falling towards the $2,611 to $2,623 range’, said Reuters analyst Wang Tao. ➡️Sign Up Now ➡️ https://octa.click/iRAl5bCodpM Partner Code ➡️ 3788810

📊 Euro rebounds, but weak fundamentals limit growth potential The euro (EUR) gained 0.33% against the U.S. dollar (USD) on Friday even though the U.S. Dollar Index (DXY) remained near a three-week high, as investors priced in the possibility of the Federal Reserve (Fed) cutting rates more slowly next year. 👉 Possible effects for traders For the past month, EURUSD has been essentially stuck in a tight range between 1.04500 and 1.06100. Numerous bearish factors, such as the sluggish eurozone economy, the dovish European Central Bank (ECB), and the possibility of Donald Trump's implementing new trade tariffs on European goods, have been mostly priced in. At the same time, the eurozone's underlying economic fundamentals remain weak, preventing investors from taking significant long positions on the EURUSD. The most significant bearish factor is the divergence in investors' monetary policy between the ECB and the Fed. Markets expect a Fed rate cut at the upcoming meeting but only price a roughly 24% chance of another reduction in January, according to the CME's FedWatch tool. Meanwhile, interest rate swaps market data implies that the ECB will cut the rates at every meeting until June 2025. The probability that the eurozone base rate will be just 2% on 5 June 2025 stands at 56%. Therefore, although EURUSD has been stabilising over the past three weeks, failing to set a new low, market sentiment remains cautious. Investors are hesitant to adopt a bullish outlook due to underlying economic concerns, which means that rallies in the pair are likely to be sold. EURUSD was rising during the Asian trading session but weakened during the early European trading hours. Today, investors will focus on Purchasing Managers' Indices (PMIs) released by the S&P Global. German data is due at 8:30 a.m., and the data for the eurozone is due at 9:00 a.m., while the U.S. figures will be released at 2:45 p.m. UTC. Traders expect the European PMIs to improve slightly but remain below the critical 50 mark, which separates economic contraction from expansion. Conversely, they expect the U.S. figures to weaken but remain close to the 50 mark. A rise in eurozone PMI, especially if it is accompanied by a drop in U.S. PMI, may pull EURUSD 1.05700. Otherwise, the pair may continue to weaken and possibly drop below the 1.04500 level. ➡️Sign Up Now ➡️ https://octa.click/iRAl5bCodpM Partner Code ➡️ 3788810

📊 GBP weakens on a more dovish outlook from the Bank of England The British pound (GBP) extended its recent decline on Friday after the U.K. Gross Domestic Product (GDP) and output data were below the forecast. The pair finished the week with a 0.95% drop. 👉 Possible effects for traders The combination of persistent U.S. inflation, potentially slowing the pace of rate cuts by the Federal Reserve (Fed), and weakening economic growth in the U.K. has prompted the Bank of England (BOE) to adopt a more accommodative approach. BOE Governor Andrew Bailey has indicated a gradual easing of four rate reductions in 2025. This should limit the rise of the pound at the end of 2024. Although expectations for the BOE's interest rate decision at the 19 December meeting remain unchanged, market expectations are pricing in a narrower path for U.K. and U.S. interest rates in 2025, continuing to pressure the British pound. In 2025, traders will need to consider whether the Fed may halt its rate reductions or even consider increasing rates if inflation fails to reach the 2% target. As for the British pound, traders should consider whether the Bank of England may adopt a more accommodating monetary policy if inflation persists, especially given market expectations of only three interest rate reductions in 2025 compared to the four anticipated by Bailey. GBPUSD was rising during Asian and early European trading hours, trying to regain some Friday losses. Market participants wait for the U.K. S&P Global Composite Purchasing Managers' Index (PMI) flash data report, coming out today at 9:30 a.m. UTC today. A higher-than-expected number will be bullish for GBPUSD, while lower data may put additional bearish pressure on the pair. ➡️Sign Up Now ➡️ https://tlt.ink/octa Partner Code ➡️ 3788810

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