Markets decline on ceasefire deal

Tensions in the Middle East eased somewhat as President Joe Biden announced that Israel had reached a ceasefire agreement with the Lebanese militant group Hezbollah after weeks of negotiations mediated by the United States.

In Europe, stocks declined, and US equity futures edged lower as traders processed Donald Trump’s latest cabinet appointments and looked forward to a series of data releases on the American economy that could provide insight into the outlook for interest rates.

The Stoxx 600 index in Europe fell by 0.3%, while S&P 500 contracts decreased by 0.2%. Meanwhile, US Treasuries gained, bringing the yield on the 10-year benchmark down by four basis points to 4.27%.

The president-elect’s tariff agenda seemed to gain further traction as Trump appointed Jamieson Greer as the US Trade Representative and Kevin Hassett to head the National Economic Council. Greer played a key role in shaping Trump’s trade policy during his first term.

Eyes on US Core PCE ahead

Investor focus will shift to a series of U.S. economic data released before Thanksgiving. This includes a report on the Federal Reserve’s preferred inflation measure, initial jobless claims, and an update on economic growth. Minutes from the latest policy meeting show that Federal Reserve officials support a cautious approach to cutting interest rates.

EURUSD

The Euro reached its highest level of the day after Isabel Schnabel, a member of the European Central Bank Executive Board, cautioned against cutting interest rates too drastically.

The currency pair has been trading around 1.05 since mid-November. Although the technical indicators are significantly oversold, they are beginning to trend upward, indicating a possible retracement following the recent decline. The next resistance level is at 1.0525; breaking above this level could lead to further gains towards 1.06 and potentially 1.0670.

Yen outstrips G-10 peers

The Japanese yen is outperforming other currencies this week as traders anticipate that the yield gap between the US and Japan will narrow next month.

On Wednesday, the yen appreciated by as much as 0.8%, reaching 151.84 against the dollar. It has risen a total of 1.9% this week, making it the strongest currency among the Group of Ten (G10) currencies. Currently, the next key support level for the yen is around 151.0. If the yen falls below this support level, it could lead to further declines towards the 150.0 area.

Brent remains above $72

Brent Crude fell sharply after the ceasefire deal was announced in Lebanon, dropping towards $72. However, oil prices steadied as indications that OPEC+ would once again delay restoring some output countered the easing geopolitical risks following the ceasefire agreement.

From a technical analysis perspective, the outlook has not changed since Brent has been trading in the same range since September. Additionally, Brent closed last week’s trading session above its daily downtrend line, which opens up the possibility for another rally ahead.

Gold bounced back

Gold remained stable as a ceasefire agreement in the Middle East reduced demand for safe-haven assets, while investors awaited U.S. economic data that could indicate the Federal Reserve’s interest rate direction.

Today, bullion traded near $2,650 an ounce after Israel and the Lebanese militant group Hezbollah reached a 60-day suspension of hostilities. The anticipation of this agreement had contributed to a decline in gold prices of more than 3% on Monday.

Despite recent fluctuations, gold is still up more than 25% this year, driven by easing U.S. monetary policy and growing geopolitical risks. However, it has faced pressure from a stronger dollar this month, particularly following Donald Trump’s election victory. On Tuesday, gold did not respond significantly to the president-elect’s threat of imposing 25% import tariffs on Canada and Mexico, which consequently strengthened the U.S. dollar.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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