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IC Markets Asia Fundamental Forecast | 30 December 2024

What happened in the U.S. session?

The EIA crude oil inventories saw 4.2M barrels of crude removed from storage on Friday to mark the fourth instance of higher drawdown in five weeks. Crude oil prices were lifted following the latest EIA inventory data as WTI oil jumped nearly 1.5% to rise above the $70 before closing at $70.60 per barrel.

What does it mean for the Asia Session?

Japan’s manufacturing sector has remained in contraction since July with the final PMI reading for December indicating no change to this trend. The yen has depreciated significantly since the end of September causing USD/JPY to surge more than 12% over this period. With many financial markets either closing early on Tuesday or are completely closed in lieu of New Year’s Day, trading activity is likely to remain muted as 2024 draws to a close.

The Dollar Index (DXY)

Key news events today

Chicago PMI (2:45 pm GMT)

What can we expect from DXY today?

After sliding lower over the last couple of months, the Chicago PMI is expected to rebound from 40.2 to 42.7 in December. However, this would still mark a 13th consecutive month of contraction in Chicago’s economic activity. Demand for the dollar could wane should we see this index post a weaker-than-anticipated result.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted by a majority to lower the Federal Funds Rate target range by 25 basis points to 4.25 to 4.50% on 18 December. Voting against the action was Beth M. Hammack, who preferred to maintain the target range at 4.5 to 4.75%.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while labour market conditions have generally eased, and the unemployment rate has moved up but remains low.
• Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
• The Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs to 2% in the September projection) and 2025 (2.1% vs 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs 2.3%), 2025 (2.5% vs 2.1%), and 2026 (2.1% vs 2%).
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• The next meeting runs from 28 to 29 January 2025.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

Chicago PMI (2:45 pm GMT)

What can we expect from Gold today?

After sliding lower over the last couple of months, the Chicago PMI is expected to rebound from 40.2 to 42.7 in December. However, this would still mark a 13th consecutive month of contraction in Chicago’s economic activity. Demand for the dollar could wane should we see this index post a weaker-than-anticipated result – a move that would provide lift for gold prices.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie has fallen for five straight weeks to lose nearly 5% over this period. This currency pair opened at 0.6211 to edge towards 0.6230 as Asian markets came online.

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10 December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wages growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Just like its Pacific neighbour, the Kiwi has depreciated significantly as it tumbled 4.8% over the past four weeks. This currency pair opened at 0.5626 to drift higher at the beginning of the Asia session.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some services sectors have continued to grow.
• Consistent with feedback from business visits, high frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to further ease monetary policy restraint.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

Manufacturing PMI (12:30 am GMT)

What can we expect from JPY today?

Japan’s manufacturing sector has remained in contraction since July with the final PMI reading for December indicating no change to this trend. The yen has depreciated significantly since the end of September causing USD/JPY to surge more than 12% over this period – this currency pair will likely remain elevated in the final trading days of 2024.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 19 December, by a 8-1 majority vote, to set the following guideline for money market operations for the intermeeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderate increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been in the range of 2.0-2.5% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a passthrough to consumer prices of cost increases led by the past rise in import prices have waned; inflation expectations have risen moderately.
• With regard to the CPI (all items less fresh food), while the effects of the pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 24 January 2025.

Next 24 Hours Bias

Weak Bearish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

The Euro has tumbled nearly 1.3% over the last three weeks as it looks to re-test its 52-week low at 1.0331. This currency pair opened at 1.0426 and was edging higher towards 1.0440 as Asian markets came online.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 12 December to mark the third successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 3.15%, 3.40% and 3.00% respectively.
• The disinflation process is well on track and most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 30 January 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

The franc has weakened significantly since the end of September with UDS/CHF rallying almost 7.5% over this period. This currency pair opened at 0.9010 before drifting lower at the beginning of the Asia session.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking for the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector was again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Just like many other currencies, the Pound has devalued strongly in the last quarter of this year with Cable breaking under the threshold of 1.2500 on 20th December. This currency pair opened at 1.2572 and was hovering around this level as Asian markets came online.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.75% on 19 December 2024 – three members preferred to reduce the Bank rate by 25 basis points, bringing it down to 4.50%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• Twelve-month CPI inflation had increased to 2.6% in November from 1.7% in September, slightly higher than previous expectations while services consumer price inflation had remained elevated, at 5.0%, while core goods price inflation had risen to 1.1%.
• Headline CPI inflation was slightly higher than previous expectations, owing in large part to stronger inflation in core goods and food, and is expected to continue to rise slightly in the near term.
• Most indicators of UK near-term activity have declined with Bank staff expecting GDP growth to be weaker at the end of the year than originally projected in the November Monetary Policy Report.
• Bank staff now expected zero GDP growth in 2024 Q4, weaker than the 0.3% that had been incorporated in the November Report, broadly consistent with the latest combined steer from business surveys and the available official data.
• The Committee now judges that the labour market is broadly in balance as annual private sector regular average weekly earnings growth picked up quite sharply in the three months to October but there remains significant uncertainty around developments in the labour market.
• Monetary policy has been guided by the need to squeeze remaining inflationary pressures out of the economy to achieve the 2% target both in a timely manner and on a lasting basis. Over recent quarters there has been progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.
• The Committee continues to monitor closely the risks of inflation persistence and will assess the extent to which the evolving evidence is consistent with more constrained supply, which could sustain inflationary pressures, or with weaker demand, which could lead to the emergence of spare capacity in the economy and push down inflation; a gradual approach to removing monetary policy restraint remains appropriate.
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 6 February 2025.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

The Loonie has been one of the weakest currencies in 2024 causing USD/CAD to surge beyond 1.4450 in recent weeks. This currency pair opened at 1.4413 and is likely to remain elevated as the day progresses.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.25% while continuing its policy of balance sheet normalization on 11 December; this marked the fifth consecutive meeting where rates were reduced.
• Canada’s economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports.
• The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force while wage growth showed some signs of easing, but remains elevated relative to productivity.
• Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
• CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected.
• Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The Governing Council has reduced the policy rate substantially since June and going forward, they will be evaluating the need for further reductions in the policy rate one decision at a time.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 29 January 2025.

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

After Friday’s larger-than-expected drawdown in the EIA inventories, crude oil prices are likely to remain buoyed on Monday. WTI oil was hovering around $70.50 per barrel as markets re-opened and this benchmark could continue its upward ascent towards the $72-mark.

Next 24 Hours Bias

Weak Bullish

The post IC Markets Asia Fundamental Forecast | 30 December 2024 first appeared on IC Markets | Official Blog.

The post Ex-Dividend 30/12/2024 first appeared on IC Markets | Official Blog.

Xinhua with the heads up:

China’s President Xi will deliver a New Year’s message

• Scheduled for 7 pm Beijing time on Tuesday
• 2300 GMT and 0600 US Eastern time on Monday, December 30, 2024

I wonder if he’ll have anything to say on economic stimulus?

This article was written by Eamonn Sheridan at www.forexlive.com.

• PBOC sets USD/ CNY reference rate for today at 7.1889
• People’s Bank of China Governor says room for lower rate
• Japan final manufacturing PMI (December 2024 ): 49.6 (prior 49.0)
• China’s efforts to prop up its flagging stock market has made yuan a casualty
• Holzmann says European Central Bank could consider waiting longer before its next rate cut
• EURUSD Technical Analysis
• Former US President Jimmy Carter dies
• Bitcoin price analysis with this support test coming soon
• China’s central government urges local governments to give cash handouts for New Year
• Trade ideas thread – Monday, 30 December, insightful charts, technical analysis, ideas
• Monday morning open levels – indicative forex prices – 30 December 2024

Weekend:

• SPX index price prediction (my bullish and bearish orientation)
• Debt ceiling drama returns: Yellen warns of mid-January deadline

It was a fairly subdued session with unofficial holidays thinning out interest and trading activity.

News and data flow was light. Japan’s manufacturing PMI for December was confirmed to have remained in contraction, although the reading improved from November.

People’s Bank of China Governor Pan Gongsheng indicated the Band has room to lower rates. As I noted at the time a contraint the Bank is facing is the weak yuan. Further reducing rates will be viewed by the Bank as raising the likelihood of further capital movement out of the country, which they’d prefer to avoid.

In news over the weekend China’s central government has urged local governments to give cash hanbdouts ahead of New Year holidays in order to bolster demand in the economy.

USD/JPY update, tracking just below 158.00:

As I post BTC/USD remains under US$94K.

This article was written by Eamonn Sheridan at www.forexlive.com.

Manufacturing PMI from Japan, final for December 2024 improves from the flash reading, and from November to 49.6, still in contraction:

• 
  preliminary (flash report is here) was 49.4
• prior 49.0

From the report (in brief):

• Manufacturing Economy: Japan’s manufacturing economy showed signs of stabilisation towards the end of 2024, with softer declines in new orders and output.

• Employment: Employment increased for the 9th time in 10 months, reversing the slight dip seen in November and reaching the strongest level since April.

• Outstanding Business: There was a continued sharp decline in outstanding business due to weak new order growth.

• Input Price Inflation: Input price inflation rose to a four-month high, driven by higher raw material prices and a weak yen. As a result, manufacturers raised their prices at the fastest rate in five months.

• Purchasing and Stocks: Purchasing activity decreased for the third consecutive month, and stock levels were depleted at the fastest rate since January 2021.

• Lead Times: There was only a marginal increase in lead times for inputs, despite ongoing delivery delays and shortages, with material availability improving.

• Future Confidence: Manufacturers were optimistic about the future, citing expectations of new product launches, business expansion, and recovery in key markets like semiconductors and automobiles.

• PMI: The Japan Manufacturing PMI for December was 49.6, indicating a slight contraction in manufacturing, the softest in three months.

• Output and Demand: Output decline softened, driven by muted demand. However, there were signs of stabilization in new orders and a slight recovery in new export demand, particularly from markets like China and the US.

• Employment Growth: Employment growth resumed, reaching the highest level since April, supporting increased manufacturing capacity.

USD/JPY tracking more or less sideways under 158:

***

As background to this, a summary of the previous three months, when Japan’s manufacturing sector experienced a consistent contraction, as indicated by the Jibun Bank / S&P Global Manufacturing Purchasing Managers’ Index (PMI):

• September 2024: The PMI stood at 49.7, signaling a contraction in manufacturing activity.

• October 2024: The PMI declined to 49.2, marking the sharpest deterioration in the sector’s health in three months. This downturn was attributed to renewed declines in investment goods and softer falls in intermediate goods, with consumer goods experiencing broadly stagnant conditions.

• November 2024: The PMI further decreased to 49.0, the lowest level since March, indicating a modest yet stronger contraction. This decline was driven by sustained reductions in new orders and output, with subdued demand from both domestic and international markets. Notably, firms reduced employment levels for the first time since February, and backlogs of work fell significantly.

These figures reflected ongoing challenges in Japan’s manufacturing sector, including weak demand in key industries such as semiconductors and automobiles, as well as persistent cost pressures from labor, logistics, and raw materials. Despite these challenges, manufacturers have maintained a degree of optimism about future business prospects, supported by expectations of new product launches and a broader economic recovery.

For Japan’s Services PMI over the past three months:

• September 2024: The Services PMI was at 53.1, indicating solid expansion in the services sector.

• October 2024: The index declined to 49.7, signaling a contraction—the first since June. This downturn was attributed to slower sales and a renewed decline in export orders. Business confidence also dropped to a 31-month low.

• November 2024: The Services PMI rebounded to 50.5, reflecting a modest expansion. This improvement was driven by increased new business and employment, with outstanding business growing at the fastest rate in eight months. However, inflationary pressures persisted due to higher costs in fuel, labor, and logistics.

These fluctuations highlight the services sector’s sensitivity to domestic and international demand, as well as cost pressures impacting business sentiment and activity levels.

This article was written by Eamonn Sheridan at www.forexlive.com.

Former US President Jimmy Carter died today, he was 100.

Chip Carter, a son of the former president, said his father died about 3:40 p.m. on Sunday in his Plains home. Carter had been in declining health for some time. He was US President from January 20, 1977 – January 20, 1981.

Typically, a sitting US President declares a national day of mourning after the death of a former President and non-essential Federal workers are given the day off and stock and bond markets are closed.

Typically, this is 5-7 days after the death of a President so it could be somewhere in the Jan 3 – Jan 7 range. This last happened on On December 5, 2018, when markets were closed in observance of the national day of mourning for George H.W. Bush.

This article was written by Adam Button at www.forexlive.com.

China’s central government has urged local authorities to provide financial aid to people facing high living costs, particularly in the lead-up to the New Year and Lunar New Year festivals. Municipalities that can afford it are encouraged to offer subsidies, temporarily reduce prices, and link social assistance to price levels, according to the Ministry of Civil Affairs.

This initiative is part of broader efforts to stimulate private consumption, which is seen as key to revitalizing the economy. With potential U.S. tariffs looming, China is also shifting its policy focus toward boosting consumption and increasing public spending in 2025.

While cash subsidies during festivals like Lunar New Year are common, the government took the unusual step of distributing funds ahead of the October 1 National Day Holiday to encourage private spending.

***

At the margin this should be a tailwind for ‘China proxy’ trades such as AUD, and also for China stocks.

The hapless AUD has been pummeled against the strong US dollar.

This article was written by Eamonn Sheridan at www.forexlive.com.

Jibun Bank Final PMI from Japan for December is due today.

• Flash Manufacturing December: 49.4 (in contraction for 6 straight months.)
• November Final 49.2

Background to this is that Japan’s manufacturing sector experienced a consistent contraction over the previous three months, as indicated by the Jibun Bank / S&P Global Manufacturing Purchasing Managers’ Index (PMI):

• September 2024: The PMI stood at 49.7, signaling a contraction in manufacturing activity.

• October 2024: The PMI declined to 49.2, marking the sharpest deterioration in the sector’s health in three months. This downturn was attributed to renewed declines in investment goods and softer falls in intermediate goods, with consumer goods experiencing broadly stagnant conditions.

• November 2024: The PMI further decreased to 49.0, the lowest level since March, indicating a modest yet stronger contraction. This decline was driven by sustained reductions in new orders and output, with subdued demand from both domestic and international markets. Notably, firms reduced employment levels for the first time since February, and backlogs of work fell significantly.

These figures reflected ongoing challenges in Japan’s manufacturing sector, including weak demand in key industries such as semiconductors and automobiles, as well as persistent cost pressures from labor, logistics, and raw materials. Despite these challenges, manufacturers have maintained a degree of optimism about future business prospects, supported by expectations of new product launches and a broader economic recovery.

***

The latest from Japan (these from Friday):

Wrap highlights:

• December inflation in Tokyo accelerated for a second month, the government temporarily phased out utility subsidies;
• the ‘Summary of opinions’ from the Bank of Japan December meeting (when the bank maintained its policy rate at 0.25%) showed the policy board members remaining optimistic in its assessment that the economy and inflation are moving in line with its projections – amidst caveats of course – supporting market expectations for a near-term rate hike, perhaps as soon as the January 23-24, 2025 meeting.

More:

• Japan finance minister Kato – alarmed by FX moves, driven by speculators

• Japan inflation data and BoJ December summary raise expectations of a January rate hike

• BoJ December 2024 Summary of Opinions – ‘Gradual increase in CPI’
• Japan Retail sales for November: +2.8% y/y (expected +1.6%)
• Japan Industrial Production for November (preliminary): -2.3% m/m (expected -3.4%)
• Japan data: October Unemployment rate 2.5% (expected 2.5%)
• Tokyo area December inflation data: Headline 3.0% y/y (expected 2.9%)

This article was written by Eamonn Sheridan at www.forexlive.com.

It’s another patchy week of holidays, official and unofficial. The best trade idea might be to chill out and recharge, but different people have different ideas.

Liquidity and interest is going to remain thin. It’ll pick up a little from January 2 and 3 but will approach normal from the 6th. I’ll be posting this week, but only lightly.

If you would like to share trade ideas, this is the thread for you!

This article was written by Eamonn Sheridan at www.forexlive.com.

As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come online … prices are liable to swing around, so take care out there. Of course, its even more precarious than usual with all the holidays around the pace. It’ll be another patchy holiday week to come. Liquidity and interest is going to remain thin. It’ll pick up a little from January 2 and 3 but will approach normal from the 6th.

Guide , little change from late Friday:

• EUR/USD 1.0424
• USD/JPY 157.76
• GBP/USD 1.2582
• USD/CHF 0.9013
• USD/CAD 1.4415
• AUD/USD 0.6215
• NZD/USD 0.5628

This article was written by Eamonn Sheridan at www.forexlive.com.

Treasury Secretary Janet Yellen fired off a warning shot to Congress today, flagging a critical debt ceiling timeline that could rattle markets in early 2025.

• Debt ceiling reinstates Jan 2
• Default risk window: Jan 14-23
• Treasury to deploy ‘extraordinary measures’ if needed

The timing adds another layer of complexity to an already heated political environment following the presidential inauguration. Markets have largely shrugged off previous debt ceiling standoffs, but the compressed timeline could spark volatility.

“Extraordinary measures” – Treasury’s emergency toolkit – will kick in if Congress fails to act, but these are temporary fixes, for perhaps 4-6 weeks. The real test will be whether the new Congress can navigate the political minefield around raising the ceiling, especially as Trump wants it eliminated.

It will be worth watching how the new administration’s relationship with Congress impacts the speed of negotiations — we will see who are the real fiscal hawks.

The market also assumes that Trump isn’t serious about bringing down the deficit, something this round of negotiations could reject or reinforce.

This article was written by Adam Button at www.forexlive.com.

Closing changes:

• S&P 500 -1.1%
• Nasdaq Comp -1.5%
• DJIA -0.8%
• Russell 2000 -1.6%
• Toronto TSX Comp -0.2%

On the week:

• S&P 500 +0.7%
• Nasdaq Comp +0.8%
• DJIA +0.4%
• Russell 2000 +0.1%
• Toronto TSX Comp +0.8%

We get two more days of trading before the scoreboard resets at zero.

This article was written by Adam Button at www.forexlive.com.