Weekly Outlook: Year-end calm likely masks inflation risks

December 29, 2024 (MLN): The majority of commodity and foreign exchange dealers are either on vacation or not in the market because it is year-end. 

Due to geopolitical and economic concerns around the world, there are a few of significant changes in two areas. The USD index is at its highest level in two years.

However, 10-year Treasury yields have been rising in spite of the Federal Reserve's aggressive rate reduction, which saw it lower its interest rate by 100 basis points to 4.5% in 2024. 

The Fed has delayed its 2% target from 2026 to 2027 by delaying it by another year, raising inflation expectations.

Additionally, the worry of a change in its global trade strategy will prevent inflationary pressure from easing. 

This is why the yields on Treasury bonds indicate that a second wave of inflation may be imminent. 

Despite the fact that the bond market is booming, if Trump delays to reveal his trade related policies or take any other action, the yields may turn the other way. 

Meanwhile, it is still holiday week, and the market may be in for another quiet week because of the lacklustre activity. The risk of volatility increases under such a situation.

I want to express my gratitude to my readers for their support over the years. Additionally, I hope that everyone has a very happy and successful new year.

#GOLD @ $ 2622- For $2660, it must clear $2642-44. However, see risk for a drop towards $ 2601. Break of $ 2588 will encourage for a test of $ 2572-75 zones.

#EURO @ 1.0427- To test the 1.0310 support level, Euro must break 1.0360. I am expecting it to hold. On the upside it needs to break 1.0510 for 1.0598. Or else 1.0280.

#GBP @ 1.2579- Cable might ease a bit. However, Pound Sterling can rise to test 1.2610 or 1.2690 unless 1.2470 gives up.

#JPY @ 157.82- For more gains, the USD has to hold the 156.50 support levels. A move beyond 159.20 will encourage for 160.10. Or else 154.80.

The writer is the former Country Treasurer of Chase Manhattan Bank

Disclaimer: The views and analysis in this article are the opinions of the author and are for informational purposes only. It is not intended to be financial or investment advice and should not be the basis for making financial decisions.