Articles

WTI crude oil settled 98-cents higher today to $70.43.

Oil traded up to $88 early last year but has been treading water near $70 for months. The opening level of the year was $71.65 so it’s on track for a small decline this year.

Today’s EIA US oil inventory data:

• Crude -4237K vs -1867K expected
• Gasoline +1630K vs -1080K expected
• Distillates -1694 vs -313K expected
• Refinery utilization +0.7% vs -0.4% expected

Global inventories are tighter than some of the commentary suggests but OPEC+ is holding back plenty of spare capacity. A key question early next year surrounds US policy towards Iran and whether Trump will try to eliminate Iranian barrels from the global market. China is the main buyer at the moment so that may prove to be a tall task.

Technically, it’s a waiting game to see if $65 holds but if it can through the next few months the spring seasonal tailwinds should help.

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

The European major indices are closing higher on the day. That runs counter to the moves seen in the US stock indices which are down sharply as money rebalances out of US and into Europe (at least today).

The final numbers are showing:

• German DAX, +0.68%
• France’s CAC, +1.0%
• UK’s FTSE 100, +0.16%
• Spain’s Ibex, +0.5%
• Italy’s FTSE MIB

For the trading year with two more days left in the year:

• German DAX, +19.3%
• France’s CAC, -2.49%
• UK’s FTSE 100, +5.39%
• Spain’s Ibex, +14.1%
• Italy’s FTSE MIB, +12.55%

Meanwhile, the US major indices are getting hammered with the NASDAQ index down -2.22% real away

• Dow industrial average -1.23%
• S&P index -1.65%
• NASDAQ index -2.22%
• Russell 2000-2.19%

For the trading year

major US indices are showing gains of:

• Dow industrial average +13.56%
• S&P index +24.48%
• NASDAQ index +30.36%
• Russell 2000, +10.02%

This article was written by Greg Michalowski at www.forexlive.com.

Natural gas prices have been a recent winner and there is talk of longer-range forecasts showing a particularly-cold January in the northeastern United States. Today’s number is something of a disappointment though after last week’s 125 bcf draw.

As for oil, it’s holding up today despite the ugly mood in markets and the EIA weekly crude data is at 1 pm ET.

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

The major US stock indices are opening lower with the Nasdaq index trading down near 1% on the day.

A snapshot of the market 5 minutes into the open :

• Dow industrial average -200.03 points or 0.45% at 43125.77
• S&P -43.20 points or -0.72% at 5994.39
• Nasdaq -200.68 points or -1.00% at 19819.68
• Russell 2000 -14.32 points or -0.63% at 2265.86

This article was written by Greg Michalowski at www.forexlive.com.

US equities battled back after a slump at the open yesterday and they will have to do it again today.

S&P 500 futures are down 33 points, or 0.6% in the premarket.

Today is the third-last trading day of the year but and it’s notable that settlement changes now make Monday as the final day for trades to settle in 2024.

So far this month, the S&P 500 is up 0.1% but that will be erased at the open.

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

• Prior month wholesale inventories +0.1% revised from 0.2%

• Wholesale Inventories

  • November Level: Estimated at $901.6 billion, a 0.2% decrease from October and a 0.9% increase from November 2023.
  • October Revision: Growth revised down from +0.2% to +0.1%.

  Retail Inventories

  • November Level: Estimated at $827.5 billion, a 0.3% increase from October and a 7.2% increase from November 2023.
  • October Estimate: Unchanged at +0.2%.
  • Retail inventories ex autos rose 0.6% vs 0.3% last month (was 0.1%)

This article was written by Greg Michalowski at www.forexlive.com.

• Prior month -99.08B
• Goods trade deficit -102.86B vs -$100.6B estimate

A few months ago, the deficit increased due to port strikes coming into the Christmas season. The move higher this month, may have been influenced by the expected Trump tariffs.

Pres. Elect Trump will be focused on bringing more manufacturing back to the US with the carrot of lower taxes if goods are manufactured in the US.

This article was written by Greg Michalowski at www.forexlive.com.

TGIF in what is a holiday-shortened week. What is moving the markets. In Europe there was no economic data out of Europe today and traders are reluctantly back from the Christmas and Boxing day holiday. In the US there will be some modest data out at 8:30 AM ET with:

• Good trade balance for November, Est. -100.6B vs -99.0B last month. With the Trump tariffs expected this may be influenced
• Whole inventories advanced for November. Est 0.2% vs 0.2% last month. Retail inventories ex auto is also due . Last month the data showed a 0.1% gain

What is moving… Well if open, the markets are moving. Looking at the USD, it is modestly lower/mixed vs the major currencies:

• EUR -0.12%
• JPY -0.15%
• GBP -0.24%
• CHF +0.18%
• CAD -0.22%
• AUD unchanged
• NZD -0.25%

Yesterday in the US stocks, they closed mixed with modest changes on the day

• Dow rose 28.77 points or 0.07%
• S&P fell -2.45 points or -0.04%
• Nasdaq fell -10.77 points or -0.05%

In premarket trading today, the futures are implying a lower open:

• Dow –153 points
• S&P -21 points
• Nasdaq -80 points

In the US debt market, the yields are mixed with the shorter end lower and the longer end of the curve higher after moving lower yesterday:

• 2-year 4.328%, -0.04 bps
• 5-year 4.445%, up 1.2 bps
• 10-year 4.601% up 2.2 bps
• 30-year 4.796%, up 3.5 bps

In other markets:

• Crude oil is trading up $0.59 or 0.83% at $70.21
• Gold is down -$7.00 or -0.27% at $2625.50
• Silver is doen -$0.27 or -0.95% at $29.51
• Bitcoin is trading up $537 at $96240

This article was written by Greg Michalowski at www.forexlive.com.

It’s a bit of a tricky one this time around with gold prices rising by over 27% already in 2024. Things have cooled off in November and December so far but that arguably owes much to the US election result, which in turn has also impacted the Fed outlook somewhat for next year. A surging dollar has helped to keep things in check, for now at least.

With gold poised to snap its December hot streak (there is still time to recover that of course), is January – typically gold’s best performing month – also under threat?

The recent seasonal pattern also suggests that January is the best month for gold over the past decade. However, that hasn’t quite been the case in the post-pandemic era. One can argue that in part, there is some frontrunning in the buying in December. But is it perhaps to do with China also struggling during this period? After all, there is always the thought of that gold rush coming through ahead of the Lunar New Year celebrations.

That being said, China itself has been a big fan of gold in the last 12 months. That in spite of what the central buying data might suggest.

Looking to next month, there are a couple of things that could set gold back to start the new year. The big one of course is market players still having the fresh memory of a more hawkish Fed from last week. That has put the dollar in a decent spot and we could see broader markets pick up from that momentum at the turn of the year.

The other is that gold has suffered a bit from a technical perspective in the past week. We saw price dip below is 100-day moving average for the first time in over a year but gold buyers did salvage that in recent sessions. The key level is seen at $2,616 currently and price is trading above that at around $2,635 today. That said, it’s tough to look into things when liquidity conditions are thin but this will definitely be a spot to watch when we resume normality next week.

If buyers can maintain the technical control, that will be a positive boost for gold to stick with the January trend.

This article was written by Justin Low at www.forexlive.com.

IC Markets Asia Fundamental Forecast | 27 December 2024

What happened in the Asia session?

During the Asian forex trading session today, the Japanese yen remained near five-month lows, trading at approximately 157.80 per U.S. dollar. This position reflects a year-to-date decline of over 10%, influenced by the persistent interest rate differential between the Bank of Japan (BOJ) and the Federal Reserve. The BOJ’s December meeting summary, released during the session, indicated a potential rate hike in January, contrasting with the Federal Reserve’s measured approach to rate cuts anticipated in 2025

What does it mean for the Europe & US sessions?

In the Europe and U.S. sessions, yen weakness is likely to persist, with USD/JPY remaining elevated due to the interest rate differential between the BOJ and the Federal Reserve. Speculation about a BOJ rate hike in January may heighten volatility in yen pairs like EUR/JPY and GBP/JPY. Strong USD demand is expected to continue, supported by the Fed’s cautious stance on rate cuts and potential risk-off sentiment. Markets may focus on yen-related developments, influencing broader currency movements.

The Dollar Index (DXY)

Key news events today

No major news events.

What can we expect from DXY today?

With no major news, the U.S. Dollar Index (DXY) is expected to trade within a range, driven by technical levels and market sentiment –  the support and resistance levels for today.

Support: 107.58

Resistance: 108.50

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

No major news events.

What can we expect from Gold today?

Gold (XAU/USD) is likely to trade in a range of $2,633 (support) to $2672 (resistance) today, with no major news influencing the market. The metal’s price will be guided by U.S. dollar movements, with a weaker DXY supporting gold and a stronger DXY applying pressure

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 AUD/USD is expected to see increased activity today as Australian banks reopen after the holiday closure. Key technical levels to watch are support at 0.6201 and resistance at 0.6265. The pair’s movement will depend on global risk sentiment, with positive sentiment likely boosting the AUD, while caution may pressure it

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?

Expect the NZD/USD to trade between 0.5553 (support) and 0.5740 (resistance), with movements influenced by AUD activity, global risk sentiment, and DXY trends. Moderate volatility is likely due to holiday-season liquidity returning.

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

No major news events.

What can we expect from JPY today?

The Japanese Yen (JPY) is expected to trade within a range today, influenced by global risk sentiment and U.S. dollar movements.

For USD/JPY, key levels are support at 155.70 and resistance at 157.92. A risk-off environment may strengthen the JPY as a safe-haven asset, while risk-on sentiment could weaken it. 

The U.S. Dollar Index (DXY) will also play a critical role, with a stronger dollar pressuring the yen and a weaker dollar supporting it. Thin post-holiday liquidity may amplify volatility, and speculation about the Bank of Japan’s policy could keep traders cautious. Expect moderate activity within these technical levels.

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?

Expect EUR/USD to trade between 1.0333 (support) and 1.0460 (resistance), with increased activity as European banks reopen. Risk sentiment and DXY movements will drive intraday action, with moderate volatility likely due to returning liquidity

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 Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

 Expect USD/CHF to trade within 0.8905(support) and 0.9011 (resistance), with increased activity due to returning liquidity. Movements will depend on risk sentiment, DXY trends, and any developments in global markets. Moderate volatility is likely.

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?

The GBP/USD is expected to trade between support at 1.2486 and resistance at 1.2614 today as British banks reopen. Increased liquidity may lead to more pronounced moves. The pound’s direction will be influenced by global risk sentiment, with risk-on sentiment supporting GBP and risk-off sentiment favoring the USD. 

Movements in the U.S. Dollar Index (DXY) will also be crucial, with a weaker DXY supporting GBP/USD and a stronger DXY applying pressure. With no major UK-specific news, trading will focus on technical levels and external global cues, with moderate volatility likely

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?

USD/CAD is expected to trade between 1.4350 (support) and 1.4466 (resistance) today. Movements will be driven by oil price fluctuations, risk sentiment, and DXY trends, with increased liquidity adding to potential volatility.

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?

Oil prices are expected to trade with increased activity today as markets reopen post-holidays. WTI Crude Oil is likely to trade between support at $68.90 and resistance at $71.30. Prices will be influenced by supply concerns, including OPEC+ production cuts, and demand sentiment driven by global economic conditions. Movements in the U.S. Dollar (DXY) may also impact oil, with a weaker USD supporting prices and a stronger USD applying pressure. Expect moderate volatility as liquidity returns to the market.

Next 24 Hours Bias

Weak Bullish

The post IC Markets Europe Fundamental Forecast | 27 December 2024 first appeared on IC Markets | Official Blog.

At the end of the day, policymakers can and will spin the narrative to however they see fit with their decision. And with the BOJ these days, the leaked reports leading up to their meeting seem to be the more important part of the narrative.

The latest inflation numbers from Japan’s capital here today might just keep things in play at the balance. But any such thinking runs in contradiction with the message from BOJ governor Ueda itself here last week.

That being said, he was careful to have not explicitly ruled out a January move. However, he did cast plenty of doubt on that and tried to suggest that they’d be more comfortable in waiting until March perhaps.

The Japanese yen is slightly higher today after the data but again, we’re still caught in holiday-thin trading. So, I wouldn’t look too much into that. If traders have to phase out the odds for a BOJ rate hike next month, there will some scaling back to do for the yen. That considering traders are pricing the decision to be nearly a coin flip for now.

This article was written by Justin Low at www.forexlive.com.

At this stage last year, we were talking about how the Fed might cut rates by around six times in 2024. This time around, we’re talking about how they might not even get to two rate cuts in 2025. As thing stand, traders are pricing in just ~36 bps of rate cuts for next year as seen here.

And among those central banks that are slated to continue cutting interest rates, the Fed is the one that market players are seeing with the highest probability of cutting the least. How the times have changed.

The dollar long con looks to be brought forward. But what has changed?

The biggest thing of course is the US election result. Trump’s win has definitely altered the landscape with threats of large scale tariffs against US trade partners and tax cuts. That has thrown a spanner in the works of the Fed, who are still hoping to get inflation back towards 2%.

The disinflation process has proven to be a bit bumpy also as of late, albeit still largely running its course. However, the muddied outlook now makes it tough to envisage a smooth and clear path back towards the 2% target. Not least with the US consumer still running hot, despite a softening labour market.

So, the real risk for the dollar now ties back to the economy and how Trump’s policies might impact all of that. The outlook now hinges on the notion that Trump will eventually get his way in executing his campaign pledges. And that’s reflected in the more hawkish Fed pricing by markets and arguably also among policymakers at the latest FOMC meeting.

As such, the reaction function suggests that any tail risk that materially leads to a different scenario other than that will be bad for the dollar. That being these few couple of situations:

1. The economy turns out to be much softer in 2025, with labour market slack gathering pace
2. The disinflation process stays the course and resumes a quicker pace again in the new year
3. Trump tariffs are not as forceful and high octane as anticipated, leading to less inflation fears
4. Trump tax cuts hit a bit of a snag and gives markets more time to digest the whole situation

I would argue that right now, emotions are still running high particularly after the latest Fed policy decision. The dot plots and Powell’s remarks suggest a pause in January, which might extend further depending on economic developments.

That’s giving the dollar a tailwind going into the turn of the year. But as we saw with how things played out this year, this sort of tailwind can eventually dissipate and turn the other way around. At some point in the middle of 2024, we were talking about just one rate cut by the Fed for the year as opposed to the six priced in during December 2023.

So, that is pretty much where we’re at. It’s a case of markets having a rough idea of what may transpire in 2025 but nothing is a given. In trading, the journey is just as important as the destination at the end of the day.

This article was written by Justin Low at www.forexlive.com.