As the Christmas holiday season approaches, trading activity typically slows, with fewer economic events on the calendar and reduced participation across global markets. The upcoming week reflects this trend, as limited market-moving developments are expected. Let’s take a closer look at what lies ahead for Monday, Tuesday, and the rest of the week. Christmas Holiday!
Monday
The first day of the week begins with a quiet start in both the Asian and London trading sessions. Market participants can expect little to no significant economic data releases during these hours, leading to subdued activity.
However, the New York session offers some points of interest. Canada’s GDP m/m report will be released, which holds the potential to sway the Canadian dollar (CAD). This data measures changes in the value of all goods and services produced by the economy, serving as a key indicator of economic health. A stronger-than-expected reading could boost the CAD, signaling solid economic growth in Canada, while weaker results may weaken the currency.
Additionally, the CB Consumer Confidence report is set to release in the U.S. A gauge of consumer optimism and spending prospects, this data could influence the U.S. dollar (USD). Higher consumer confidence could reinforce expectations of economic resilience, possibly pushing the dollar higher. Conversely, a drop in confidence may raise concerns about future economic activity, weighing on the USD.
Tuesday
Tuesday is expected to carry the same trend of light activity in the Asian and European trading sessions. However, one noteworthy release during this period is the Reserve Bank of Australia’s (RBA) monetary policy meeting minutes. These minutes provide a detailed insight into the discussions and decisions made by the RBA, including the potential direction of future interest rates. Any hawkish tone may provide a boost to the Australian dollar (AUD), while dovish comments could lead to a pullback.
The American session brings some key economic releases that could drive short-term volatility in the U.S. dollar. Here’s a closer look at what’s on the docket:
Core Durable Goods Orders m/m
This metric tracks orders for goods designed to last three years or more, excluding transportation items. It’s a strong indicator of manufacturing activity because businesses typically adjust spending on durable goods based on demand. A rise in core durable goods orders could strengthen the dollar by pointing to business confidence and economic growth.
Durable Goods Orders m/m
Including the transportation sector, this report offers the broader picture of durable goods demand. While it can be more volatile due to large transportation orders, the data is still an important signal for the manufacturing sector’s health. A positive report could reinforce expectations of resilience in the U.S. economy, while a shortfall might weaken the greenback.
New Home Sales
The release of new home sales data provides a pulse check on the housing market and consumer financial confidence. A strong number could lift the dollar, suggesting robust domestic activity. Meanwhile, weaker-than-expected sales might point to affordability concerns or tighter financial conditions.
Richmond Manufacturing Index
This index evaluates manufacturing activity within the Fifth Federal Reserve District. An uptick may signal improving conditions in the sector, boosting the dollar, while a decrease could signal contraction and dampen the currency’s strength.
Wednesday, Thursday, and Friday (Christmas Holiday Begins)
The second half of the week sees even less market movement, coinciding with the Christmas holiday. On Wednesday, many countries begin observing Christmas, resulting in widespread bank closures and significantly reduced trading volumes. Both Thursday and Friday are expected to be marked by limited activity, with many markets around the world remaining closed or operating on reduced hours. Traders should prepare for light liquidity, potentially leading to subdued price action or exaggerated moves due to thinner volumes.
Final Thoughts
With light trading and reduced economic activity on the horizon, market participants should manage their expectations for volatility and significant price movements during the holiday season. Remaining mindful of the key economic releases on Monday and Tuesday is essential for those trading the Canadian dollar, Australian dollar, or U.S. dollar. Beyond that, most will likely shift their focus towards the start of the new year, when markets tend to pick up momentum once again.
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