Last week, the international financial landscape saw considerable fluctuations as the U.SCongress narrowly averted a government shutdown, and the Federal Reserve's decision stirred waves of uncertainty in the markets.

In the stock market, U.Sequities faced a full-blown decline with the Dow Jones falling by 2.25% over the week, while the Nasdaq and S&P 500 indices dropped by 1.78% and 1.99%, respectivelyAcross the Atlantic, European indices did not fare much better; the FTSE 100 in the UK slid by 2.60%, the DAX 30 index in Germany decreased by 2.55%, and France's CAC 40 was down by 1.82%.

As the Christmas holidays approach, trading activity in both the U.Sand Europe is expected to waneFollowing the Fed's announcement, attention will shift to upcoming economic indicators, including the Conference Board's Consumer Confidence Index and the trade balance for NovemberMoreover, the Bank of Canada and the Australian Federal Reserve are set to release minutes from their recent meetings.

In Japan, the Bank of Japan (BoJ) opted for a steady course in December, leading to a short-term plunge in the yen's value

Investors are advised to stay vigilant regarding potential verbal or actual interventions in the forex market by the BoJThe Bank’s Governor, Kazuo Ueda, is scheduled to address the markets on the 25th, and minds are beginning to speculate about the central bank's next moves, with many believing it might be prudent to wait until at least March to make any adjustments in interest ratesThis timing allows better insight into the evolution of wage pressures following the conclusion of spring salary negotiationsMeanwhile, inflation in Japan continues to hover above the BoJ’s target of 2.0%, with the Tokyo CPI for December due for release on the 27th.

Shifting the focus back to the United States, the nation came perilously close to a federal shutdownJust hours before the deadline, the House of Representatives passed a funding bill to keep the government operating until mid-March

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This legislative measure now heads to the Senate for approval before reaching the President's desk.

Recent developments at the Fed saw the central banking body conduct its end-of-year meeting where they chose to reduce interest rates by 25 basis points for the third consecutive timeThe latest dot plot reveals a prediction that by 2025, the Fed may only decrease rates twice more by 25 basis points each time.

This hawkish stance caught many analysts off guard, as Fed Chair Jerome Powell indicated during the press briefing that policymakers were contemplating how their decisions might influence future economic growth and inflation.

Market participants will be keenly observing the December Consumer Confidence Index, a measure that has been on the rise for the past two monthsA significant sub-index, the "Difficulty of Employment" measure, is trending downward, which generally correlates closely with the official unemployment rate

A further drop in this measure would likely signify ongoing growth in job creation.

Concurrent with this, reports on durable goods orders and new home sales for November will provide a crucial lens through which to evaluate the state of the U.Seconomy as the fourth quarter comes to a closeFollowing a slight increase of 0.3% in durable goods orders in October, a decrease of 0.4% is anticipatedInvestors, however, tend to focus on core capital goods orders, excluding defense and aircraft, which are less volatile and play a role in GDP calculationsAdditionally, initial claims for unemployment benefits will continue to inform on the labor supply and demand dynamics.

Turning attention to commodities, international oil prices experienced a downturn last week, pressured by a rising dollar and ongoing concerns regarding demand projectionsThe WTI crude oil near-month contract fell by 1.92% to $69.46 per barrel, while the Brent crude oil near-month contract decreased by 2.08% to $72.94 per barrel.

Sevens Report Research, a notable market research firm, foresees a bearish outlook for oil, with persistent worries about potential oversupply in the physical markets by 2025 due to dampened demand expectations and robust production trends.

The volatility in the stock market has negatively affected oil and other commodity prices, particularly following statements from the Fed that suggested the anticipated rate cuts in 2025 may be less aggressive than previously thought

The ICE Dollar Index surged by more than 1% throughout the week, reaching the highest levels it has seen in over two yearsGenerally, a stronger dollar has a detrimental impact on commodities priced in dollar terms.

Meanwhile, the international gold price fluctuated dramatically as expectations of interest rate cuts from the Fed diminished, testing the critical support level of $2600. The December futures contract for gold on the COMEX fell by 1.0%, closing at $2622.10 per ounce.

According to a recent report from JPMorgan, physical demand for gold is currently low, and expectations for rate cuts in 2025 are relatively mutedHowever, if inflation concerns escalate unexpectedly, it may catalyze a rally in gold prices and inform Fed monetary policy adjustments.

Phillip Streible, Chief Market Strategist at Blue Line Futures, noted, "The latest data indicates that the November Personal Consumption Expenditures (PCE) index, as well as personal income and spending figures, fell short of expectations

We’re seeing funds returning to the gold market and reestablishing positions; a sudden ease in pricing began with the expectation of two interest rate cuts, which led to significant selloffs in goldNow, however, there seems to be a renewed possibility of three cuts, although it’s still premature to make definitive statements."

Meanwhile, uncertainty clouds the European economic outlookChristine Lagarde, President of the European Central Bank (ECB), hinted last week that the ECB may continue to lower its key interest rates due to the unfavorable growth outlook exacerbated by threats of U.StariffsShe mentioned, "The direction is clear; we expect to continue reducing rates." Concerns have particularly arisen regarding the rapid increase in service prices, often tied to wage growthHowever, some recent data suggest that inflation in services has "fallen sharply" when adjusted for base effects.

The ECB also predicts that wage growth in the Eurozone will dip from 4.8% this year to 3% by 2025. Lagarde acknowledged the "astonishing" inertia of consumer spending, with households storing away significant portions of their income

As tariffs on imports from Europe rise, growth faces new challenges"The growing geopolitical uncertainty may impact household sentiment anew, especially if our largest export market, the U.S., turns to protectionist policies, which could impede growth in the Eurozone," she elaborated.

In the UK, the Bank of England decided to maintain its benchmark interest rate at 4.75% during its end-of-year reviewHowever, divisions surfaced among policymakers regarding the prospect of a rate cutEven with persistent inflationary pressures, three of the nine monetary policy members voted in favor of a 25-basis-point cut, with Deputy Governor Dave Ramsden among the dissenters.

Economic forecasts indicate that the UK's GDP growth for Q4 has been adjusted downwards from 0.3% six weeks ago to a flat zeroAccording to recent government data, the UK economy experienced shrinkage in September and October, marking the first instance of consecutive monthly output declines since 2020. Following Chancellor Reeves' announcement of a £25 billion tax hike in the October 30 budget, business sentiment has significantly dipped

The members supporting the unchanged rate argued that the uncertainty surrounding whether these rising costs would be passed on to consumers as higher prices, or lead to rising unemployment and slowing wage growth, remains "particularly unsure." Conversely, those advocating for a rate cut believe that an overly stringent policy stance could drive inflation well below the 2% target over the medium term and result in excessive spare capacity in the economy.

Governor Bailey of the Bank of England stressed the need for the bank to stick to its current “gradual” approach to interest rate cuts, stating, "Given the increasing economic uncertainty, we cannot commit to when or how much we will cut rates next year." Market pricing for interest rate futures shows just a one-third likelihood of action at the next meeting in FebruaryExpectations for two cuts in 2025 remain unchanged