General Market Analysis – 18/12/24

US Markets Ease Ahead of Federal Reserve – Dow Down 0.6%

US stocks eased lower again in trading yesterday as investors looked ahead to today’s key Fed rate decision, with the Dow marking its ninth consecutive day of losses. The Dow fell 0.61% on the day, followed by the S&P, which dropped 0.39%, and the Nasdaq, which closed 0.32% lower. Treasury yields ended the session near flat, with the 2-year yield finishing at 4.245% and the 10-year at 3.99%. Currencies remained relatively quiet, but the dollar edged higher against most of the majors, with the DXY gaining 0.13% to reach 106.98. Oil prices fell further as investor concerns over future demand persisted, with Brent down 0.97% to $73.19 and WTI slipping 0.90% to $70.08. Meanwhile, gold continued to trade within recent ranges, easing 0.28% to $2,646.15.

All About the Fed Today

The long-awaited conclusion of the Federal Reserve Bank’s final meeting of the year is now just a few trading hours away, and traders are anticipating subdued markets ahead of the rate announcement. Expectations heavily favour a 25-basis-point cut today, and any deviation from this outcome is likely to trigger significant market movements. Excluding the unlikely scenarios of no change or a 50-point cut, volatility is expected to stem from any updates to the dot plot and forward guidance from the committee. The market is leaning towards a less dovish stance as it looks ahead to 2025 and the incoming Trump administration. Regardless of the outcome, traders anticipate immediate reactions following the rate decision and subsequent press conference, as markets digest the updates or continue recent trends if there are no surprises.

Famine and Feast Ahead for Traders

Today has the potential to be the most volatile trading day of the week, though most of the action is expected to take place in the final hours of trading following the Federal Reserve’s rate announcement. The macroeconomic calendar is relatively sparse during the Asian session, and markets are expected to remain muted. However, the European session features significant tier-1 data from the UK, with CPI figures set to be released. A deviation from the anticipated 2.6% increase could create heightened activity among sterling traders, particularly as it comes just a day ahead of the Bank of England’s rate decision. Despite this, most market participants expect rangebound conditions until the US session, when the Fed announcement is scheduled late in the day.

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