CPI

Japan’s yields, which hit fresh multi-year high overnight, remained in the positive despite other global yields falling in reaction to US CPI. That made the Japanese yen the strongest currency. With the gap between yields in Japan and the rest of the world narrowing, all major JPY pairs fell, including the EUR/JPY as the yen rallied. The EUR/JPY forecast remains bearish.

Bond yields are unlikely to fall back significantly in the near-term, even if we see a small miss in US inflation data today. This should keep the upside limited for gold. Therefore, we are still quite cautious when it comes to near-term gold outlook, even if we ultimately expect to see gold rising to $3,000 later this year.

A hot CPI report could lead traders to start asking whether the Fed’s interest rate cutting cycle may be completed already, complicating the path forward for a central bank that has clearly been hinting that the easing cycle isn’t done yet.

GBP/USD Forecast: This week brings notable UK economic indicators, including GDP, inflation, and retail sales, alongside the key catalyst: U.S. CPI data. These events are set to shed light on the pound’s struggles with pressured lows against the dollar.

Crude Oil Week Ahead: Crude oil remains on a bullish track this year, reaching 4-month highs. Next week, key inputs such as Chinese economic data, shifts in Fed rate expectations, and OPEC and IEA monthly reports are expected to shape the still range-bound direction of oil prices.

Bond yields and AUD/USD had a different take on today's inflation figures. And on this occasion, I believe forex traders are in the right. And if the Aussie can withstand the strength of the US dollar, it could bode well for bears seeking a cheeky EUR/AUD short.

EURUSD Forecast: The EUR/USD enters 2025 on a bearish note following a sharp downturn at the end of 2024. However, extreme oversold levels hint at potential bullish reversals. Key market-moving factors, including Eurozone inflation data and U.S. Non-Farm Payrolls, are in focus this week, adding volatility risks.

Showcasing the GBP strength is the struggling EUR/GBP. With the latter testing the 0.82 support area, sterling is therefore trading at its best levels since March 2022 against the euro. But against the dollar, it has been held back. In fact, I reckon there is a good chance we may see the GBP/USD start to head lower again and may even go on to break 1.2500 support, once UK’s services inflation eases more significantly - possibly in early next year. If seen, that would allow the BoE to turn more dovish. So, the GBP/USD outlook remains bearish heading into 2025.

Crude Oil Week Ahead: The bearish outlook on oil prices for 2025 is colliding with significant Middle Eastern reforms. OPEC’s decision to extend its output cuts into 2025 has stabilized oil prices near their 4-year support zone, which will be tested this week by Chinese economic data, US inflation reports, and Middle East developments.

GBPUSD, EURJPY: Inflation indicators between the eurozone and the Japanese economy are due this week, following the jump in UK’s inflation rates next week, adding reversal potential to the dollar’s rally ahead of Trump’s presidency.

USDJPY Forecast: The bull run of the US Dollar Index has pushed the USDJPY back in the borders of its primary uptrend, and further volatility risks are on the horizon with the US CPI results.

With Kashkari throwing the word ‘pause’ into the mix ahead of a US CPI report, traders should brace themselves for further USD gains should it come in hotter than expected.

The Fed is seen as nearly 50/50 to cut interest rates again in December after Donald Trump and the Republicans secured a “Red Wave” last week - see what to expect from US CPI!

The update to the US CPI is anticipated to show the headline reading widening to 2.6% in October from 2.4% per annum the month prior.

EURUSD, Bitcoin Forecast: With Republicans in the lead, the dollar’s bull run and growing speculation around a deregulated crypto market are pushing Bitcoin toward the 100,000-checkpoint while pressuring EURUSD to 7-month lows.

Dow Jones Forecast: With renewed market optimism across indices, cryptocurrencies, and the US dollar following Trump’s win, the Dow Jones is hitting record highs, prompting analysis of potential upcoming resistance levels and the sustainability of this bullish momentum.

Crude Oil Week Ahead: With volatility still restrained post-US election and FOMC week, crude oil markets remain poised for a potential breakout as key events from OPEC, the IEA, and economic data from China and the US are on the horizon. The longer the price remains within this tight range, the more significant any upcoming breakout may be.