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The European Central Bank (ECB) recently introduced a groundbreaking initiative that promises to reshape the understanding of wealth distribution in the Euro Area. The newly unveiled quarterly Distributional Wealth Accounts, developed over an extensive eight-year period, represent a significant leap forward in evaluating wealth dynamics by combining national accounts with household survey data. Published for the first time this week, the accounts aim to offer a more detailed and frequent assessment of wealth distribution, raising the potential to influence discussions on the role of monetary policy in addressing issues of inequality.

While the proportion of the wealthiest households in the Euro Area remains above 43%, the research reveals a notable reduction in wealth disparity among households over the past five years. Key metrics, such as the share of wealth held by the top 5% compared to the bottom 50%, demonstrate a decline in the proportion of the wealthiest households from 2016 to the second quarter of 2023, albeit still surpassing the 43% mark. Concurrently, median net wealth has seen an increase of approximately 40%, according to the ECB.

The decline in wealth inequality is attributed to several factors, including the positive impact of increased house prices on homeowners, who represent over 60% of the population. Over the specified period, the net wealth per household for homeowners surged by 27%. Non-homeowners also experienced a 17% growth in net wealth, primarily driven by observed increases in deposits. However, there is a caveat that a recent decline in house prices could potentially reverse these effects, contributing to a resurgence of inequality.

Euro-zone household net wealth has seen a substantial overall increase of 29%, equivalent to about €13.7 trillion ($15 trillion), over the past five years, according to the ECB data. These figures not only signify robust economic growth but also underscore the persistent challenge of wealth inequality on the political agenda. In the aftermath of the Global Financial Crisis, there has been an escalating demand for more timely and comprehensive information on wealth distribution, making the newly introduced dataset highly relevant to considerations of monetary policy.

The ECB acknowledges the global attention on wealth distribution, with central banks facing criticism for allegedly exacerbating inequality through ultra-loose monetary policies deployed in response to various crises. The central bank contends that wealth disparities over the past few decades have been primarily driven by factors beyond its purview. According to the ECB, monetary policy lacks both the mandate and appropriate instruments to deliberately target wealth distribution.

As the ongoing debate on the impact of monetary policy on inequality unfolds, the ECB underscores its commitment to providing comprehensive and impartial insights into the evolving landscape of wealth distribution. The unveiling of the quarterly Distributional Wealth Accounts serves as a testament to the ECB's dedication to transparency and informed policymaking in an era where the intersection of monetary policy and inequality is under intense scrutiny.

With the market digesting the upside surprises seen in last week's US labour market statistics, yen traders are preparing for a strong start to the week. Last week ended on a high note as Japanese consumer confidence jumped higher, and the Japan's Services PMI survey managed to remain comfortably in expanding territory.

This week the market will be updated on the December Tokyo inflation report and November average earnings data. The Bank of Japan will anxiously scrutinize these results, hoping that there is momentum in domestic price pressure, thus allowing it to finally consider some degree of policy tightening down the line.

In this context, the headline Tokyo CPI could edge slightly lower from the 2.6% growth recorded in November, despite the recent higher oil prices due to the Middle East developments. More crucially, the CPI component excluding food and energy prices will probably remain around the 2.5% area, a tad below November's 2.7% print. This is a level that could bring smiles to the BoJ members' faces.

The last BoJ gathering of 2023 turned out to be a non-event with the post-meeting rhetoric from Governor Ueda mostly focusing on the importance of wages. This argument has been at the forefront of BoJ's efforts for some time, but we are now getting closer to April 2024 when it could be decision time for the BoJ. Interestingly, the early indications for the 2024 wage round appear positive as a big retailer recently proposed a 7% pay increase for its part-time staff.

Market participants are trying to gather enough evidence to support expectations for a monetary policy tightening move at the January meeting. However, the odds of such a move taking place look very slim despite Ueda's comments that a policy change could involve an element of surprise. In addition, pushing its interest rate back in positive territory could be a gamble for the BoJ at this stage when so many pieces of the economic puzzle are still missing.

Until we get more concrete details on the 2024 wage round, both the BoJ and the market would have to be content with the earnings and spending data. On Tuesday, the November household spending details could show another negative yearly print but confirm the recent improvement seen in this indicator. Similarly, on Wednesday we will get earnings details for the month of November. This data set is slightly out of date, but important conclusions could be reached especially if the yearly figure heads again north towards its recent peak of 2.9%.

The bearish move recorded in euro/yen after the November 2023 high, which resulted in a new 5-month low, appears to have ended. This pair is currently hovering at the busy 157.90-158.61 area and this week's data could make it easier for euro bulls to regain market control. A series of downside surprises could open the door for a move above the 159.32-159.64 region with intervention rumours then gradually and hesitantly reappearing.

Should data releases surprise on the upside, especially the core Tokyo inflation figure, there could be an opening for the yen bulls to push euro-yen lower and test the lower boundary of the recent range at 154.35.

The impending decision centers around two critical prerequisites for the launch of spot-backed Bitcoin ETFs. Firstly, the SEC must approve the 19b-4 filings submitted by exchanges, outlining the ETFs' details. Secondly, the regulator must give the nod to the S-1 forms, the registration applications from ETF issuers, including industry heavyweights BlackRock and Fidelity. The SEC, led by Gary Gensler, is expected to vote on exchanges' filings in the coming days, with speculations rife about potential simultaneous decisions on issuer applications.

An SEC representative declined to provide insights into the current status of the applications, leaving market participants in suspense.

Enthusiasts believe that the approval of Bitcoin ETFs could be a transformative moment for the digital asset space. Michael Anderson, co-founder of crypto venture firm Framework Ventures, remarked, "The market is still seriously underestimating the potential impact of a Bitcoin ETF approval." The approval could trigger substantial inflows from both retail and institutional investors, marking a significant milestone for the acceptance of cryptocurrencies in traditional finance.

However, the SEC, under both Democrat Gary Gensler and his predecessor Jay Clayton, has previously cited concerns about investor protection and the potential for market manipulation, leading to the rejection of Bitcoin ETF proposals in the past.

Speculation intensified after a legal setback for the SEC in August when it lost a significant case against crypto asset manager Grayscale Investments. The market believes that the regulator may be compelled to yield to the increasing demand for a Bitcoin ETF.

Market sentiment, fueled by expectations of regulatory approval, contributed to a 160% surge in Bitcoin prices last year. Despite this, the cryptocurrency has been trading within a relatively narrow range around $44,000 since the beginning of 2024, showing resilience despite broader market fluctuations.

As the week unfolds, investors and industry players anxiously await the SEC's decision, which could reshape the trajectory of Bitcoin and the broader cryptocurrency market.

Navigating the EUR/USD waters as the new trading week dawns reveals a somewhat stable global risk appetite, largely undisturbed by the lighter holiday trading of recent weeks. As Forex gears up for action following the festive pause, the EUR/USD seems poised to resume its trajectory, closely mirroring the positive outlook—predominantly shaped by the U.S. Federal Reserve's softened stance. This week's Consumer Price Index (CPI) data from the U.S. looms as a litmus test for the EUR/USD's course ahead.

Monday's early trading holds promise as a telling barometer of the EUR/USD's behavioral sentiment. An ascent and sustained value beyond the 1.09500 to 1.09600 levels could potentially signal bullish tendencies.

This optimistic atmosphere had bolstered the EUR/USD due to various fundamental and technical reasons. The U.S. Dollar had been trending towards multi-month lows, propelled by growing market consensus anticipating a Fed interest rate cut by March 2024. Contrarily, the European Central Bank's policy stood relatively hawkish.

Technically, the price surge had breached the $1.1000 threshold, marking a four-month high—an impressive feat that painted a bullish picture.

However, this bullish momentum encountered a twist, evident in the risk-on rally that initially peaked the currency pair and then sharply reversed its course, driving prices down from recent highs. Recent days have witnessed a consolidation phase, as indicated in the price chart below, with the $1.0900 area emerging as a support level following a double bottom formation. Notably, a substantial resistance is evident near the prominent $1.1000 mark.

The recent bullish bounce at the higher support level of $1.0930 hints at a potentially positive day ahead. There might still be an opportunity to enter a long position during the London session for a swing trade, provided the price's acceleration isn't too rapid.

The last couple of weeks allowed speculators to test market sentiment in thin trading conditions. But as full volume returns to Forex on Monday and Tuesday, the terrain will likely shift back to its typical state, drawing the participation of financial institutions. While the EUR/USD remains within sight of its higher levels, those with a bearish outlook may focus on support levels, seeing a move below the 1.09300 level as a testament to lingering downward sentiment.

Caution might be warranted for bulls approaching resistance near $1.1000, especially on a possibly tranquil Monday without significant economic data releases. Yet, those anticipating upward momentum from the EUR/USD cannot be faulted. The initial days of the week might unfold with substantial volatility as major players rejoin the EUR/USD action. An early display of bullish momentum could indicate that institutions view the currency pair as potentially oversold, especially if it dips below the 1.09000 level. Sustaining values above 1.09800 might set the stage for an assault on the 1.10000 mark.

Establishing the price below $1.0900 today could be interpreted as a highly bearish signal.

As for the economic calendar, there's nothing of significant importance today for either the EUR or the USD.

The New Year unsurprisingly kicked off with a hangover for both stock and bond markets, as investors began the year by closing their positions and taking profit following an impressive two-month rally that was boosted by the expectation that the Federal Reserve (Fed) would soon start cutting the interest rates and cut them thoroughly throughout this year. We begin the new year with the expectation that the Fed will cut the rates 5 times, by 25bp each, and the first rate cut will be announced by March, with around 64% probability. Note that this probability was standing somewhere around 80% by the end of last year and it's come down, as investors probably realized that the expectations, and the market rally went well ahead of themselves. And of course, the minutes from the Fed's last meeting, released last week, didn't give any clarity other than the general thinking that the Fed rates are certainly 'at or near their peak' for this cycle, but that there is an 'unusually elevated degree of uncertainty' meaning that the expectation of around 75bp cut this year is certainly not a done deal. And indeed, the strength of the US economy, and its jobs market wouldn't justify an imminent start of the Fed cuts this spring.

In this context, last week's jobs data from the US came in stronger than expected, yet again. The US economy added more than 200'000 new nonfarm jobs in December, and the average earnings accelerated more than expected, above 4%. Some saw a bit of weakness in the US job metrics pointing at the falling job openings and the falling participation rate, but rationally speaking, an NFP figure above 200K is not pointing at a severe slowdown which would urge the Fed to start cutting the rates in two-and-something month and cut by 150bp to the end of the year. Even Janet Yellen said it – in quite an unusual declaration after Friday's jobs report –said that 'what we are seeing now I think we ca describe as soft landing', and again a soft landing doesn't justify a 150bp cut from the Fed this year.

As such, there is no surprise that we see the US 2-year yield rebound to 4.40% and the 10-year yield return past the 4% – its biggest weekly advance of the US 10-year yield since October. The rising yields halted the dollar's bleeding. The EURUSD sank below the 1.10 mark as soon as the year started. The rising US yields also stopped the rally in equities. The S&P500 dipped below 4700 – having been unable to post a fresh record at the end of the latest rally, and the rate-sensitive Nasdaq 100 fell more than 4% since its December peak – which was an ATH. And because the correlation between the US treasuries and Nasdaq 100 stocks remains high, a further rise in the US yields will likely cause a deeper retreat for the US stocks – and especially the most-loved tech stocks. But note that this correlation will likely decline with the start of the earnings season this week, as the company results will give investors a various range of reasons to buy or sell stocks. Overall, according to FactSet, the estimated yoy earnings growth rate for the S&P 500 is 1.3% for the Q4. If that's the case, it will mark the second straight quarter of year-over-year earnings growth for the index, and it's another evidence that the US economy doesn't need the Fed's help to stay afloat.

This week's major economic data is the US inflation data due Thursday. The headline inflation in the US is expected to have slowly accelerated to 3.2% from 3.1% printed a month earlier, while core inflation is expected to have further eased to 3.8% from 4% printed a month earlier. Soft inflation numbers, ideally softer-than-expected, could slow the corrective selloff in both stock and bond markets, yet the inflation risks are now tilted to the upside. Tensions in the Red Sea region explode the price of shipping goods from Asia to Europe and America. The cost of shipping goods from Asia to Europe doubled since last December, and that's a bad indication of what's to come for inflation numbers in the coming months. Remember, the last time we saw the shipping costs surge – that was during the pandemic – had followed a significant rise in a very wide range of consumer prices. Therefore yes, inflation figures in US and Europe have come significantly down last year, but the easing could slow or reverse. And that's the biggest risk to the dovish Fed and European Central Bank (ECB), and Bank of England (BoE) expectations this year.

Happily, though, the oil prices continue to see strong resistance despite the Red Sea tensions. The barrel of US crude couldn't clear the $74 offers last week and we start the week below the $73pb level. The geopolitical risks prevail, but traders continue to see the tops in an effort to force the price of a barrel of American crude to below $70pb again.

Bloomberg economists expect the US consumer price inflation to have increased by 3.2 percent year over year in December, according to data from the Bureau of Labor Statistics. This marks a slight uptick from the November figure of 3.1 percent, likely influenced by rising energy costs.

On the other hand, core inflation, excluding volatile food and energy components, is expected to have decreased to 3.8 percent in December, down from 4 percent the previous month, as per the Bloomberg survey.

While positive developments in core inflation have been scarce, these combined figures might be perceived by market participants as an indication that progress in combating inflation is expected to be sluggish this year, approaching the Federal Reserve's 2 percent target.

Chair Jay Powell signaled in the December Fed meeting that the central bank had concluded its interest rate hikes for this cycle. Following this shift, market expectations have leaned towards monetary easing, with an approximately 80 percent probability of a quarter-point cut in March.

These expectations, already softening in the initial week of the year, could lose momentum if there is evidence suggesting only incremental advancements in tackling inflation.

Core Consumer Price Index & Consumer Price Index will be released this coming Thursday at 21:30 (GMT+8). The market is expected to experience high volatility and spread as data released will heavily affect investor's decision and as well as the Fed decision on how early to reduce the interest rates. Besides the markets, the Dollar's direction for the month will be heavily determined by this coming event.