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Federal Reserve Hikes Another 75bp and Pledges More as Inflation Persists 

Weekly Market Outlook: Markets Gets Quiet For Holidays

Weekly Market Outlook – As the year draws to a close, Forex markets are expected to be quiet this week. In the coming days, we’ll be watching the Bank of Japan’s summary of opinions, which will provide some detail about the recent increase in the yield ceiling that sent the yen soaring. Due to the lack of activity in the markets this week, traders and investors seeking to “get things done” may be able to influence the markets without being prompted by the news. Volatility may be on the horizon. 

What to watch on the economic calendar this week: 

Monday, Dec 26: 

  • JPY: Unemployment Rate (DEC) 
  • JPU: Retail Sales (NOV) 

Tuesday, Dec 27: 

  • USD: S&P/Case Schiller Home Price (OCT) 
  • JPY: Industrial Production Prel (NOV) 

Wednesday, Dec 28: 

  • USD: Pending Home Sales (NOV) 
  • USD: Richmond Fed Manufacturing Index (DEC) 

Thursday, Dec 29: 

  • GBP: BOE Consumer Credit (NOV) 
  • GBP: Mortgage Approvals (NOV) 
  • USD: Unemployment Claims 

Friday, Dec 30: 

  • USD: Chicago PMI (DEC) 
  • GBP: Nationwide Housing Prices (DEC) 

USD — Second-tier US data 

Over in America, Monday is a public holiday, which means that there will be no market activity on Monday. The remainder of the week is relatively quiet, with only Wednesday’s pending home sales and regional business surveys releasing notable data, which traders typically overlook.  Weekly Market Outlook One of the main stories might be the scarcity of liquidity. It is likely that liquidity will be thinner than usual due to many investors closing their books and traders taking time off. Because of this, markets can move sharply without any news, and headlines can have a tremendous effect even if there is no news. Therefore, anything that happens in the coming week is more likely to be ‘noise’ than ‘signal’. 

JPY — BoJ is strengthening the yen 

Japanese yields have been allowed to trade over a broader range this week due to a surprise adjustment to the Bank of Japan’s yield curve control strategy. In his remarks, Governor Kuroda downplayed the transaction as simply a ‘fine-tuning’ of policy to ensure smooth bond market functioning, stressing that no tightening was occurring.   However, market participants did not see it that way. Investors saw this move as laying the groundwork for proper rate increases next year as inflation spiked and the government prepared to roll out a $200 billion stimulus package.  Weekly Market Outlook Rates are now expected to return to zero by April, with the market’s pricing in a 15bps rate hike. By that time, a new Governor of the Bank of Japan will be in charge, so traders are betting that a new era of monetary tightening will dawn in Japan. This is why Wednesday’s summary of the BoJ‘s December meeting will be closely watched. The minutes of the meeting are similar to this release. Although it’s less detailed, it’s released much sooner, so its importance is increased.   There will be a lot of attention paid to future policy tweaks – was this a one-off move as Kuroda suggested or the first step? The yen is on the verge of a comeback, as the tide has begun to turn. There are few forces ravaging the currency this year such as interest rate differentials, a trade shock from soaring energy prices, and a lack of tourism.  Weekly Market Outlook Oil prices have decreased to trade almost unchanged over the past year, allowing tourists back on the island. Along with recessionary concerns, foreign central banks might stop tightening next year, which could help compress yield differentials back in favor of the yen. When the labor negotiations conclude, the biggest variables are who will replace Kuroda as BoJ Governor and how much wages will rise. The yen faces a critical period in the coming months due to two upcoming events in the spring. 

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AximTrade ensures that you are fully up-to-date on all major financial market events by providing you with timely information. Make use of the Economic Calendar to stay ahead with the latest market news, and the AximDaily Weekly Market Outlook to get a comprehensive overview of the market trend. Experience the joy of easy, hassle-free trading with AximTrade’s mobile app. AximTrade trading app simplifies and facilitates account management and trading, allowing users to manage their accounts with one click and with all the tools and features they need to ensure seamless, effective trading. For a detailed analysis, here’s a comprehensive overview of the FX Market Trends in 2022 and What to Watch Next Year. Happy holidays!  
 
 
 
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