This week's economic data reinforces market confidence in the FED's interest rate cut, leading to analysis of major currency pairs next week

The US dollar held steady near five-month lows against 10 currencies in a weekly rout on Friday as data from the Federal Reserve's favourite inflation gauge fell short of expectations. US bonds rose for a fourth straight week, their best streak of gains since March, as a series of economic data boosted market confidence that the Fed will cut interest rates early next year.

"The soft landing narrative is completely dominant, with the economy remaining strong and inflation continuing to decline," wrote Louis Navellier, analyst at Navellier & Associates, who expects the year to end with highs.

Data from the Fed's favourite inflation gauge came in below expectations. The core personal consumption expenditures price index rose just 0.1 per cent in November, up 3.2 per cent from a year earlier, broadly in line with expectations. Economists polled by Dow Jones expected monthly year-on-year growth of 0.1 per cent and 3.3 per cent respectively.

Despite opposition from several Fed policymakers this week, the data helped solidify investor expectations for an earlier and deeper rate cut next year. Swap traders are betting that rates will be cut by more than 150 basis points in 2024, double the Fed's forecast.

Ben Jeffery, analyst at BMO Capital Markets, wrote after Friday's PCE data: "We believe the market is biased against downside surprises, which has translated into a somewhat counterintuitive price response. We expect a long hibernation for Treasuries near the early close and long weekend."

Other reports on Friday showed that consumers are also increasingly confident that U.S. inflation is on the right track.

The dollar held steady near five-month lows against 10 currencies in a weekly rout.

In commodities, oil prices recorded their biggest weekly gain since October as shipping routes detoured to avoid militant attacks in the Red Sea increased transit times.

Analysis of major currency trends:

EUR: EUR/USD rose, closing at 1.1014, up 0.03%. Technically, the preliminary resistance to the upside of the exchange rate is at 1.1038, further resistance is at 1.1064, and key resistance is at 1.1116; the preliminary support to the downside of the exchange rate is at 1.0960, further support is at 1.0908, and more critical support is at 1.0882.

GBP: GBP/USD rose, closing at 1.2695, an increase of 0.05%. Technically, the preliminary resistance to the upside of the exchange rate is at 1.2720, the further resistance is at 1.2750, and the key resistance is at 1.2804; the preliminary support to the downside of the exchange rate is at 1.2636, the further support is at 1.2582, and the more critical support is at 1.2552.

JPY: USD/JPY rose, closing at 142.38, up 0.20%. Technically, the preliminary resistance to the upside of the exchange rate is at 143.14, further resistance is at 144.17, and the key resistance is at 144.71; the preliminary support to the downside of the exchange rate is at 141.57, further support is at 141.03, and more critical support is at 140.00.