In the Week Ahead: Focus on US PCE and GDP Data

The euro advanced early Monday, with EUR/USD trading around 1.1520 in the European session. Growing speculation that the Federal Reserve may soon begin cutting interest rates is putting pressure on the US Dollar. Market participants now look ahead to Tuesday’s release of US September Producer Price Index (PPI) and Retail Sales data for fresh direction.

Expectations for a December Fed rate cut strengthened after New York Fed President John Williams signaled that further policy “adjustment” may be appropriate, noting that labor-market risks have become more concerning than lingering inflation pressures.

Additional commentary from other Fed officials reinforced a cautious tone. Boston Fed President Susan Collins maintained that she would require a “high bar” to support additional easing, while Dallas Fed President Lorie Logan emphasized the need for more clarity before pursuing further cuts, suggesting that holding rates steady may offer the Federal Open Market Committee more time to gauge the current level of policy restraint.

Across the Atlantic, the European Central Bank is expected to keep interest rates unchanged through at least the end of 2025, following its decision in October to maintain current policy settings. A recent survey of economists pointed to steady inflation trends and a balanced economic outlook as reasons for the ECB’s prolonged pause.

ECB President Christine Lagarde reiterated on Friday that the central bank remains alert to inflation risks and stands ready to adjust policy if needed to ensure inflation returns to its 2% target.

Bitcoin edged higher on Monday following a difficult week, but the broader market tone remained fragile as ongoing institutional redemptions and uncertainty over the Federal Reserve’s December policy outlook continued to weigh on sentiment.

This modest uptick comes after Bitcoin tumbled more than 10% last week to seven-month lows around the $80,000 mark.

Spot Bitcoin ETFs saw $1.22 billion withdrawn in the week ending Nov. 21, bringing total outflows over the past month to roughly $4.34 billion.

Despite the redemptions, trading volumes surged to record levels, exceeding $40 billion last week—an indication of what analysts are calling “institutional capitulation,” as large investors reposition ahead of year-end.

Macro headwinds continue to dominate sentiment across digital assets. Market pricing now assigns roughly a 70% chance of a Federal Reserve rate cut in December, up markedly from around 44% a week earlier. Still, several Fed officials have struck a cautious tone, highlighting persistent inflation pressures and a labor market that remains resilient.

Adding to the uncertainty, last week’s U.S. federal government shutdown delayed several key economic releases, leaving markets without crucial data and complicating expectations for Fed policy. Investors now await this week’s scheduled releases of retail sales and producer price figures for clearer direction.

Oil prices slipped on Monday, adding to last week’s losses, as progress in Russia–Ukraine peace negotiations and a stronger U.S. dollar weighed on market sentiment.

Both benchmarks lost roughly 3% last week, settling at their lowest levels since October 21, amid concerns that a peace agreement could pave the way for lifting sanctions on Moscow and reintroducing previously restricted Russian supply to global markets.

The recent sell-off was largely driven by President Trump’s push for a swift Russia–Ukraine peace deal, which markets view as a potential trigger for a rapid return of Russian crude to international buyers.

Over the weekend, U.S. and Ukrainian officials reported progress in talks on a proposed peace plan that would require Kyiv to cede territory and abandon its bid to join NATO. President Trump has set a Thursday deadline for the agreement, though European leaders are pressing for more favorable terms for Ukraine.

Broader market sentiment was also dampened by uncertainty over the Federal Reserve’s December policy decision. While some investors remain cautious, rate-cut expectations increased after New York Fed President John Williams signaled that easing may be appropriate “in the near term.”

Meanwhile, the U.S. dollar strengthened, with the dollar index on track for its biggest weekly gain in six weeks and hitting its highest level since late May. A stronger dollar typically pressures oil prices by making crude more expensive for buyers using other currencies.

U.S. stocks surged on Friday, lifted by growing expectations of a Federal Reserve rate cut in December. However, a volatile session for Nvidia kept broader market gains in check despite reports that the U.S. may consider easing restrictions on the company’s AI chip sales to China.

Mega-cap tech stocks helped lead the market higher, with Alphabet and Apple rebounding as investors stepped in to buy the recent dip.

Nvidia traded in a wide range, swinging between gains and losses after reports suggested U.S. officials are in early discussions about potentially allowing the company to resume selling its H200 AI chips to China. The news briefly supported sentiment across AI-linked names, which have been under pressure amid growing concerns of an overextended artificial intelligence trade.

Risk appetite strengthened after New York Fed President John Williams signaled that monetary policy could see “further adjustment in the near term,” citing rising risks to employment and easing inflation pressures. He described current policy as “modestly restrictive” and said the Fed aims to move closer to a neutral stance.

Williams’ comments sharply increased market expectations for a December rate cut, with odds rising to nearly 70%, up from about 29% just a day earlier. His remarks also helped temper concerns sparked by the stronger-than-expected September jobs report released on Thursday.