Financial markets uncertain about future

The prolonged US government shutdown lasting 43 days has finally come to an end, likely providing some relief to government officials and somewhat stabilising the economy.

However, financial markets remain anxious and uncertain about future. While the current funding flow may offer temporary relief, it does not solve the underlying issues.

The agreement addresses only three of the annual twelve spending bills, leaving the other nine needing approval by February 2026.

This uncertainty is concerning, which is why market participants are taking a cautious stance as they assess future developments. Indicators suggest a potential slowdown in GDP growth, and it is hoped that the Bureau of Statistics will begin updating economic data this week.

The disruption in the flow of official economic information may have unsettled policymakers.

As a result, several members of the Federal Open Market Committee (FOMC) have started to resist further interest rate cuts next month.

The Bureau of Statistics is expected to release the September Non-Farm Payroll (NFP) data, which is typically issued in October but is now anticipated on November 20. Although delayed, this data should accurately reflect the situation as it was compiled before the government shutdown.

Market participants will closely monitor unemployment figures to see if they remain stable or have increased.

The FOMC will convene on December 9-10 to discuss interest rates. During the shutdown, the private sector produced fewer economic reports, indicating some easing and a gradual cooling in the job market.

However, the US job market overall has not deteriorated. Looking at the potential for a rate cut in December, market probability has decreased significantly, dropping by nearly 25 percent to 40 percent.

Next week, the Eurozone will release its Purchasing Managers Index (PMI), which will be scrutinized for clues on interest rates, as the European Central Bank (ECB) may have concluded its cycle of rate cuts. The ECB is expected to maintain its 2% deposit rate, with much depending on upcoming inflation data.

In Japan, economic indicators clearly point to a slowdown. Recent GDP growth numbers exceeded expectations largely due to exports. The next policy rate decision is set for December. Investors are still anticipating a rate increase, but the new Japanese administration favors a more dovish stance.

This implies that if the economy continues to weaken, the Bank of Japan (BOJ) will face pressure to keep its rates steady.

Last week, there was notable volatility in gold prices. On Friday, gold fluctuated between US$ 179 during the transition from the early Asian morning to North American trading sessions.

In my note from last Monday, I mentioned that for gold to resume its upward trend, it needs to close at US$ 4,198, and I still have doubts that it has reached its lowest point. Although it peaked at US$ 4,245 during the week, it ultimately closed at US$ 4,080 on Friday.

My outlook for this week remains the same. Volatility will persist. Buyers will attempt to drive prices higher during dips, but I believe there is further downside for gold before it can rebound.

Pakistan Market (SBP NOTIFICATION)

The State Bank of Pakistan (SBP) has made two major announcements through its notification and both are of major relevance and needs to be discussed and highlighted.

On November 5, SBP announced the launch of Web Portal (InvestPak) for investment in government securities.

The SBP has clearly crafted this initiative to facilitate and enhance the appeal of investing in government securities (PIBs, T-bills, Sukuk) for individual and corporate retail investors who might face challenges accessing conventional investment avenues.

Investors now have the flexibility to manage multiple accounts. However, unlike in the past, banks are now required to assist them with registration, enabling trading in government securities at any time during business hours.

As per the SBP circular, the portal provides guidelines and specific regulations for joint account holders and corporate bidders.

This marks another significant advancement in the right direction, but the SBP must ensure that banks fulfill their responsibilities to guarantee success.

There is already a call centre set up to address Investpak inquiries. The State Bank of Pakistan should also establish a team of experts to monitor bank’s support for this initiative, along with creating a public inquiry booth to promote better understanding.

In another major move on Friday November 14, it announced an amendment in instructions related to Sale of Foreign Currencies to Individuals.

It suggested that cash transactions are set to be discouraged. Foreign currency (such as $/£/€) cannot be directly deposited into forex accounts.

Instead, it must be transferred via wire or digital methods. Using account transfers will help track the flow of funds and minimize various types of risks.

I believe this will assist IMF’s pending query. For travelling you will still get currency notes.

For better understanding, the SBP data is derived from the balance of payments (BOP), while the Ministry of Commerce (MoC) relies on trade invoicing, which leads to a timing discrepancy. The SBP has not made any errors. If you examine the information on their website, you will see that the difference is categorized under “others” rather than under “imports of goods and services”. Additionally, the discrepancy arises because the SBP figures are based on a payment basis. It’s also crucial to note that invoices under US$ 5,000 are not included in the trade figures as payments.

Therefore, it should also help alleviate pressure on PKR/$, strengthen Pakistan Rupee and resolve other mismatches.

Both notifications represent a positive step forward.

WEEKLY OUTLOOK — NOV 17-21

GOLD @ US$ 408000 The market is preparing for another volatile week. The next upward movement will rely on New York closing above US$ 4210 to continue the upward trend. On the downside, keep an eye on a potential break below US$ 3910, which could lead to a test of US$ 3840.

EURO @ 1.1621— Like last week, I have a positive outlook for the EURO. I anticipate that the Euro will maintain support at 1.1530, but it must surpass 1.1690 to reach 1.1740.

GBP @ 1.3173— Be optimistic about the Pound Sterling as long as it stays above 1.3090. A breach of 1.3225 will support a move towards 1.3295.

JPY 154.55— The upcoming action will largely hinge on whether the 155.48 level is breached. If it doesn’t break, there is a risk of a decline to 153.30 or 152.90 before the US dollar rises again.

Copyright Business Recorder, 2025