Three Markets to Watch
The Christmas week is usually associated with lower volatility and thin trading, which results not only from the reduced number of sessions on major exchanges but also from the holiday season. This year, however, market conditions may surprise us. The accumulation of economic data from the United States just before the holiday break, along with key and final GDP figures from the United Kingdom, means investors should remain alert. In the coming days, particular attention should be paid to the GBPUSD currency pair, the US100 index, and the oil market (OIL).
GBPUSD
On Monday, key data from the United Kingdom regarding GDP and business investment levels will be released. The latest Bank of England meeting delivered the expected rate cut, but the central bank's statement sounded moderately hawkish, which temporarily supported the pound. The market expects quarterly GDP growth of around 0.1% and annual growth of 1.3%. Any disappointment in the data, especially a quarterly GDP decline, could increase pressure on the BoE to implement faster rate cuts, which would negatively impact sentiment towards the British currency. On the other hand, the final GDP reading is not expected to differ significantly from previous estimates.
US100
Tuesday, December 22, will bring a true flood of important reports from the United States, which may shed new light on the state of the economy. Investors will receive, among others, the second estimate of Q3 GDP, quarterly PCE inflation, industrial production data, housing market reports, durable goods orders, and the consumer confidence index. Such a large batch of data in one day is likely to trigger a spike in volatility and could redefine market expectations regarding the future path of Fed interest rates. Changes in these forecasts will have a particularly strong impact on the Nasdaq 100 (US100) and smaller companies in the Russell 2000 index, which are especially sensitive to the cost of external capital. Increased activity should also be expected in the US dollar.
OIL
Crude oil prices remain near five-year lows, reflecting the forecasted large oversupply of the commodity in 2026. Investors are currently paying only 55 dollars per barrel of WTI crude. The upcoming US GDP and PCE releases will allow the market to price in future demand for the commodity. A key, though difficult-to-estimate, risk remains the situation in Venezuela. The presence of a large US fleet off its coast, threats of a maritime blockade, and extraordinary bonuses for soldiers suggest that the risk of armed conflict is real. Although current Venezuelan oil exports are not dominant on a global scale, an outbreak of conflict in the region could trigger a sharp, speculative spike in oil prices. It is worth noting that due to the holiday calendar, the weekly US oil inventory data for this week will not be released until December 29.
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