Markets are heading into the last weeks of 2023, with some investors now anticipating rate cuts as early as March.

US Data

The Fed's main inflation indicator, the personal consumption expenditures report, will be released on Friday, providing investors with their final update on inflation for this year.

November is predicted by economists to be a flat month for the PCE price index for a second consecutive month, while a 0.2% increase in the core measure—which accounts for volatile food and energy costs—will occur.

In addition, information on consumer confidence, initial claims for unemployment, and orders for durable goods will be available. Reports on both new and existing house sales are included in the housing sector updates.

UK Dara

The Bank of England's 2% objective for U.K. inflation is currently being exceeded, and the most recent data released on Wednesday is expected to support the continuation of high pricing pressures relative to other major countries.

This month, the pound reached a three-month high versus the euro as a result of a dramatic decline in euro zone inflation, which fueled expectations that the BoE would hike interest rates more slowly than the European Central Bank.

Stronger sterling is not a sure thing, though, as high rates have the potential to send the British economy—which the BoE believes will stagnate in 2024—into a recession. The BoE's decision to continue responding to current inflation trends or adopt the longer-term stance that weakening economic conditions would lower wages and prices will determine the future of the pound.

BOJ edging closer to shifting

The Bank of Japan is once again a worldwide outcast as expectations grow that it may eliminate negative interest rates in the upcoming months, while attention at the Fed and other major central banks shift to when to start reducing rates.

Investors will be closely examining the bank's rate statement for any signs that a pivot may occur at the BOJ's next meeting in January, even though a shift is unlikely to occur at the policy meeting on Tuesday.

For the first time since July, the yen has returned to the stronger side of 141 per dollar thanks to this anticipated reversal and the Fed's dovish stance.

Gold might see its first yearly increase since 2020

A declining dollar and mounting anticipation for rate cuts in 2024 are driving gold's potential for its first yearly advance since 2020.

Falling interest rates make owning zero-yield bullion more attractive.

The 10-year U.S. yield has been steadily climbing since early 2022, but it didn't become positive until June, which caused gold to drop from a nearly all-time high. Even if they are at their highest point in eight years, gold is still expected to rise beyond $2,000 an ounce. Even yet, the cost is still around 20% less than its 1980 all-time high of more than $2,500, adjusted for inflation.

Given the increasing political and economic unpredictability, investors are counting on a rush of rate cuts early in 2019. This might signal a gold investor sweet spot.

(Sources: investing.com, reuters.com)