Equity markets rallied into the close of the week and tested new record highs, following a strong month of gains in November. Markets are now looking for a strong ‘Santa Claus Rally’ to break into record territory. The war on inflation is now won, according to optimistic market analysts, so the stage is set for rate cuts in Europe and the USA. There are warning signs and red flags. The Geo-Political situation is critical and could deteriorate further, while Europe wallows in deep recession. Manufacturing PMI data from the US and Europe remains in contraction mode, while growth and demand remain challenging. The coming week will focus on growth and inflation, while the US will focus on employment, which culminates in Non-Farm Payrolls this coming Friday. Employment is a key measure used to determine inflationary pressures. The EUR will open trade this week just under 1.0900, while the GBP looks to regain 1.2700.
Commodity currencies have benefitted the softer reserve, with the AUD breaking back above 0.6650, while the NZD looks to test 0.6200 once again. This is a big week for the monetary policy, with both the RBA and Bank of Canada announcing interest rate decisions. Energy prices are key to Western economic recovery and OPEC+ agreed to voluntary production cuts to challenge Westen economic recovery.