U.S. Core PPI, FOMC Rising: Important Economic Highlights December 2023

Amidst the unfolding landscape of Economic Highlights shifts and market fluctuations, the recent developments have captured the attention of investors and analysts alike. The steadiness of the dollar in the face of the Federal Reserve’s ongoing meeting, coupled with projections of imminent rate adjustments, sets the stage for a compelling narrative in financial markets.

Against this backdrop, the surge in U.S. stock markets, coupled with significant declines in cryptocurrencies and crude oil benchmarks, paints a dynamic picture of market volatility. As anticipation mounts for upcoming economic releases and pivotal decisions by central banks, the intricate dance between economic indicators and investor sentiment remains a focal point, shaping the trajectory of global markets in the days ahead.

Key Highlights:

• U.S. stock markets surge, reaching levels last seen in January 2022.
• Bitcoin and Ethereum witness significant declines in value.
• Crude oil benchmarks slump amidst concerns over demand and supply.
• Upcoming economic releases include vital data from the eurozone, UK, and the U.S.
• EUR/USD shows a moderate rebound following November’s CPI figures

Economic Highlights Dollar Maintains Stability Ahead of Fed Meeting

The dollar remained mostly steady against major currencies on Tuesday, displaying minimal fluctuations despite the commencement of the Federal Reserve’s two-day meeting. With the annual headline consumer price growth tapering slightly from October, hopes persisted for an early rate adjustment in the upcoming year.

The CME fed watch tool gauged the likelihood of a 25-basis points rate cut in March at 40.2%, with a similar probability (50%) in May. Additionally, a scenario for a 50-basis points rate cut in May stood at 23.7%.

Read More: Consumer Prices Show Slight Increase of 0.1% in November

U.S. Markets Surge, Oracle Faces Setback

Tuesday witnessed robust performance across U.S. stock markets, propelling all three major indices to levels last seen in January 2022. This upsurge followed the release of U.S. inflation data, fueling anticipation for a rate modification in the first half of the upcoming year. Oracle drew attention as its quarterly revenue fell short of Wall Street estimates, leading to a significant stock price decline of over 12%.

Cryptocurrencies Witness Declines

The top two cryptocurrencies, Bitcoin and Ethereum, plunged on Tuesday. Bitcoin experienced a 5.88% decline, closing the session near $41K, while Ethereum fell by 5.45%, concluding near $2,200. The estimated crypto market capitalization also dipped to approximately $1.63 trillion from levels surpassing $1.7 trillion the previous week.

Economic Highlights Crude Oil Slumps Amidst Demand Concerns

Both WTI and Brent crude oil benchmarks faced declines on Tuesday. Weak demand forecasts from China, coupled with inadequate supply cuts from OPEC+, overshadowed potential tensions in the Middle East that could disrupt the supply chain.

Wednesday promises a slew of Economic Highlights data releases, including industrial production figures from the eurozone, UK monthly GDP, UK construction output, and industrial and manufacturing production. Following these releases, the U.S. is scheduled to unveil monthly PPI data, preceding the FOMC statement and press conference.

Read More: UK Labour Market November 2023 Statistics Are Out

EUR/USD Shows Moderate Recovery

The EUR/USD exhibited a moderate rebound on Tuesday following November’s Consumer Price Index (CPI) figures, which rose 3.1% annually, aligning with forecasts. Core prices, excluding volatile items, also met expectations, showing a 4% annual upturn.

Investors await the central bank’s policy decision, anticipated to maintain unchanged interest rates. However, the potential for a 25-basis point rate cut as early as March, per the CME fed watch tool, could impact price action, especially after the U.S. PPI data release.

Gold Remains Stable

Despite growing expectations of an earlier rate cut, gold prices remained relatively unchanged on Tuesday, hovering near monthly lows below the $1980 mark. Fed President Powell’s continued hawkish stance, coupled with acknowledgment of significant progress against inflation this year, impacted the precious metal’s movement. Market focus remains on the Fed’s policy announcement and the Producer Price Index (PPI) for fresh inflation cues.

WTI Oil Prices Decline

Oil prices experienced a significant downturn, with WTI and Brent benchmarks dropping by 3.79% and 3.62%, respectively. The U.S. Energy Information Administration (EIA) revised its 2024 price forecast for Brent crude by $10 a barrel, anticipating supply cuts from OPEC+ to support prices in the first half of 2024. Focus shifts to U.S. oil inventory data, expected to reveal a 1.5 million-barrel decrease in crude stocks.

Economic Highlights on U.S. Stocks Maintain Positive Trajectory

U.S. stocks continued their upward trend on Tuesday, as the US 500, US 30, and US tech 100 added 0.57%, 0.55%, and 0.96% to their values, respectively. The momentum, reported by Reuters, remained unaffected by inflation data, with attention turning to the Federal Reserve’s final policy decision of the year on Wednesday. The focus remains on U.S. inflation data and key corporate events, including Adobe’s quarterly earnings and Intel’s AI chip presentation.

Conclusion

The market dynamics showcased remarkable movements across various sectors, from the surge in U.S. stocks to the sharp declines in cryptocurrencies and crude oil benchmarks. With pivotal Economic Highlights data on the horizon and market reactions dictating potential shifts, investor focus remains keenly attuned to upcoming releases and the Federal Reserve’s impending decisions. The EUR/USD’s rebound amidst anticipated policy adjustments reflects the nuanced interplay between economic indicators and market sentiments, paving the way for an intriguing landscape in the days ahead.