Let’s dive straight into it with the first meeting date and what market players are pricing in for that.

• Fed: 29 January (~91% probability of no change, ~9% probability of a 25 bps rate cut)
• ECB: 30 January (~99% probability of a 25 bps rate cut, ~1% probability of no change)
• BOJ: 24 January (~54% probability of no change, ~46% probability of a 25 bps rate hike)
• BOE: 6 February (~59% probability of no change, ~41% probability of a 25 bps rate cut)
• SNB: 20 March (~78% probability of a 25 bps rate cut, ~22% probability of a 50 bps rate cut)
• BOC: 29 January (~63% probability of a 25 bps rate cut, ~37% probability of no change)
• RBA: 18 February (~50% probability of a 25 bps rate cut, ~50% probability of no change)
• RBNZ: 19 February (~59% probability of a 50 bps rate cut, ~41% probability of a 25 bps rate cut)

As for the year itself, these are what the rates market is pricing in for the coming 12 months:

• Fed: -36 bps
• ECB: -111 bps
• BOJ: +45 bps
• BOE: -55 bps
• SNB: -53 bps
• BOC: -54 bps
• RBA: -74 bps
• RBNZ: -112 bps

As a reminder, take these with a pinch of salt. It’s all a fluid situation and these odds and pricing can shift quite dynamically in the first half of the year especially.

This time last year, traders were pricing in six rate cuts by the Fed for 2024 with the first one priced in for March. We then swung as much to pricing in just one rate cut during the middle of the year before going back to settle around two to three. At the end of the day, the Fed did cut rates by three times this year but the one in September was a 50 bps move.

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

Global Markets:

•  Asian Stock Markets : Nikkei up 1.33%, Shanghai Composite up 0.1%, Hang Seng up 0.78% ASX up 1.67%
• Commodities : Gold at $2643.35 (-0.04%), Silver at $30.04 (0.8%), Brent Oil at $72.89 (0.56%), WTI Oil at $69.84 (0.55%)
• Rates : US 10-year yield at 4.530, UK 10-year yield at 4.508, Germany 10-year yield at 2.2865

News & Data:

• (CAD) GDP m/m  0.3% vs 0.2% expected

Markets Update:

Asia-Pacific markets showed mixed performance on Christmas Eve following gains in U.S. tech stocks overnight.

Japan’s Nikkei 225 slipped 0.32% as minutes from the Bank of Japan’s October meeting revealed members’ commitment to rate hikes if economic and inflation conditions aligned. Meanwhile, Honda shares surged 15%, and Nissan dropped over 5% after the automakers announced plans to merge, aiming to form the world’s third-largest car manufacturer by sales. The discussions are expected to conclude in June 2025.

South Korea’s Kospi fell 0.26%, while the Kosdaq edged up 0.16%. The country’s consumer sentiment index dropped to 88.4 in December, its lowest in over two years, signaling growing pessimism according to the Bank of Korea.

Hong Kong’s Hang Seng index rose 0.42% at the open, while China’s CSI 300 increased by 0.10%. Australia’s S&P/ASX 200 climbed 0.35% during a shortened trading session.

In the U.S., the S&P 500 gained 0.73%, closing at 5,974.07. The Nasdaq Composite rose 0.98% to 19,764.89, driven by notable gains in Tesla, Meta Platforms, and Nvidia. The Dow Jones Industrial Average added 66.69 points, closing 0.16% higher at 42,906.95.

Trading volumes remained light, with muted activity expected through the week. The New York Stock Exchange will close early at 1 p.m. ET on Christmas Eve and remain shut on Christmas Day.

Upcoming Events: 

• 03:00 PM GMT – USD Richmond Manufacturing Index

The post Tuesday 24th December 2024: Asia-Pacific Markets Mixed as U.S. Tech Stocks Rally Ahead of Christmas first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 24 December 2024

What happened in the Asia session?

As widely expected, it was an extremely quiet session with minimal activity as trading volume was thin in view of the Christmas holiday week.

What does it mean for the Europe & US sessions?

The Bank of Japan’s (BoJ) core CPI has moderated significantly lower throughout 2024, easing from 2.6% down to 1.5% YoY in November. The forecast for December points to an unchanged reading of 1.5% which could place further downward pressures on the yen and keep USD/JPY elevated.

Most banks in Europe will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted on Christmas eve, Tuesday. In addition, most financial markets will also have an early close on Tuesday with Christmas falling on Wednesday so traders should prepare for unusually thin trading volume for the remainder of this week.

The Dollar Index (DXY)

Key news events today

Richmond Manufacturing Index (3:00 pm GMT)

What can we expect from DXY today?

The Richmond Manufacturing Index showed manufacturing activity in the Fifth District remaining sluggish in November but more businesses were optimistic that conditions would improve over the next six months. The composite manufacturing index remained unchanged at -14 in November while the forecast for December points to a slight improvement, with the index expected to print at -10. A weaker-than-expected result could create some headwinds for the greenback later today.

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

Richmond Manufacturing Index (3:00 pm GMT)

What can we expect from Gold today?

The Richmond Manufacturing Index showed manufacturing activity in the Fifth District remaining sluggish in November but more businesses were optimistic that conditions would improve over the next six months. The composite manufacturing index remained unchanged at -14 in November while the forecast for December points to a slight improvement, with the index expected to print at -10. A weaker-than-expected result could create some headwinds for the greenback later today.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

Monetary Policy Meeting Minutes (12:30 am GMT)

Christmas Eve Bank Holiday (All Day)

What can we expect from AUD today?

The Reserve Bank of Australia (RBA) will release its minutes from the board meeting that took place on 10th December where the central bank made a ninth consecutive pause – the official cash rate stands at 4.35%. The minutes could provide further insights into the deliberations that took place amongst board members as they arrived at the decision to keep rates on hold once more. The Aussie was trading around 0.6240 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

Christmas Eve Bank Holiday (All Day)

What can we expect from NZD today?

Just like its Pacific neighbour, New Zealand banks will be closed from 24th to 26th December in observance of Christmas. Trading activity is likely to be significantly muted this week – the Kiwi was trading around 0.5640 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

BoJ Core CPI (5:00 am GMT)

What can we expect from JPY today?

The Bank of Japan’s (BoJ) core CPI has moderated significantly lower throughout 2024, easing from 2.6% down to 1.5% YoY in November. The forecast for December points to an unchanged reading of 1.5% which could place further downward pressures on the yen and keep USD/JPY elevated.

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 Bullish

The Euro (EUR)

Key news events today

Christmas Eve Bank Holiday (All Day)

What can we expect from EUR today?

Most banks in Europe will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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

Christmas Eve Bank Holiday (All Day)

What can we expect from CHF today?

Most banks in Europe will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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 Bullish

The Pound (GBP)

Key news events today

Christmas Eve Bank Holiday (All Day)

What can we expect from GBP today?

Most banks in Europe will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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

Christmas Eve Bank Holiday (All Day)

What can we expect from CAD today?

Canadian banks will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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 Bearish

Oil

Key news events today

API Crude Oil Stock (9:30 pm GMT)

What can we expect from Oil today?

After rebounding strongly on Friday, crude oil prices declined on Monday with WTI oil sliding nearly 0.5%. This benchmark fluctuated between $69.94 and $68.59 before closing at $69.24 per barrel. Concerns on weaker global demand and supply surplus in 2025 combined with a strong dollar have weighed on this commodity. WTI oil was hovering around $69.50 per barrel at the onset of the Asia session.

Next 24 Hours Bias

Medium Bullish

The post IC Markets Europe Fundamental Forecast | 24 December 2024 first appeared on IC Markets | Official Blog.

With China, it’s always hard to tell. But the big question is, are things really different for China this time around as compared to all their promises over the last few years? They’ve definitely stepped up the rhetoric but I want to say that actions speak louder than words at the end of the day. Chinese equities have endured a rough period of three straight years of declines but they will be snapping that in 2024. However, it owes much to the brief surge right before the Golden Week holiday going into October:

Domestic demand conditions are extremely subdued. And when you couple that with low inflationary pressures and the collapse of the property sector in recent years, it’s tough to build things back up from the ground. That is not to mention the more challenging outlook globally with Europe supposedly wanting to diversify from China and the ongoing trade war with the US. The latter is set to intensify further once Trump takes office next year.

There’s been a lot of big promises from Beijing to do more as per their big announcements since the lead up to the Golden Week holiday. But as seen by the chart above, investors are still holding some reservations.

The surging rally has come to a halt and there has been some consolidation only afterwards. A sign of caution perhaps? Or are investors biding their time for the next big announcement to dive back in again?

China has always been an interesting opportunity for investors no matter where you’re from. The last few years have been tough but that is expected as their handling of the Covid pandemic has been less than ideal. Hence, the rebound has been much slower.

I want to say there’s a lot of investor “angst” towards China but not in the traditional sense. It’s more of a case that investors tend to regard China as a strong growth hub and recent years have made valuations there very, very cheap. So, it’s a case of them wanting China to bounce back and to get in on the action.

I don’t think we’re reaching a point of desperation just yet. But perhaps we’re arguably at a stage where investors are trying to will something to happen on just about any optimistic sign they can get.

That could lead to a couple of modest bounces for Chinese stocks as we look towards next year, similar to the spike seen above.

But in the bigger picture, I want to say that Beijing has to do more on the fiscal front to really convince. They can pull whatever numbers out of their behind on the economy but it’s not a great indication when nobody believes it.

And with the demographic challenge that China is facing over the next few decades, it’s going to be a major issue if they can’t steer the ship in the right direction from the onset. Japan 2.0 may be the future that they are looking at.

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

Goldman Sachs from earlier this week (Bloomberg TV interview) on Chinese equities. Analysts at GS say stocks in China are supported on a dip in price next year. Chinese stocks face limited downside in 2025. GS cite:

• market has factored in trade tension risks already
• domestic stimulus measures offer a buffer against any further selloff
• market participants expect more concrete measures to boost consumption
• equity valuations have come off their October peak
• potentially improving fundamentals for companies
• GS forecasts 7% earnings growth for the MSCI China gauge in 2025, and 10% in 2026
• 60% US tariff hike on Chinese goods is unlikely, but if so 10% valuation downside from the current level

***

We’ve just had some announcements from China’s Ministry of Finance on further stimulus measures ahead (nothing specific yet):

• China finance ministry announce fiscal support measures

Reuters collated the headlines more broadly:

• China will step up fiscal spending and accelerate the pace of spending in 2025, according to the Finance Ministry.
• Fiscal spending will focus more on improving people’s livelihood and boosting consumption, the Finance Ministry stated.
• The government will arrange for larger-scale issuance of government bonds to provide additional support for stabilizing growth, the Finance Ministry reported.
• Efforts will be made to fend off risks in key areas, said the Finance Ministry.
• The government will further increase transfer payments to local governments to strengthen their financial capacity, according to the Finance Ministry.
• China will support the expansion of domestic demand, said the Finance Ministry.
• The Finance Ministry announced plans to appropriately increase the basic pensions for retirees and raise the basic pensions for urban and rural residents.
• Support will be provided for building a modern industrial system in 2025, with full efforts directed toward achieving breakthroughs in core technologies, the Finance Ministry stated.
• The government will actively expand effective investment, reasonably arrange bond issuance, and use government investment to drive more social investment, the Finance Ministry said.
• Efforts will be made to resolutely prevent issues such as arbitrary charges, fines, and unreasonable distribution of costs, according to the Finance Ministry.
• Tariff policies will be improved, and cooperation with ‘Belt and Road’ countries will be deepened, the Finance Ministry reported.
• China will comprehensively deepen fiscal and tax system reforms and effectively prevent and resolve local government debt risks, the Finance Ministry stated.

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

DXY (US Dollar Index):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance, Additionally, when the price remains above the Ichimoku cloud, it’s typically seen as a strong bullish signal, indicating upward momentum.

Pivot: 107.58
Supporting reasons: Identified as a pullback support close to the 38.2% Fibonacci retracement. indicating a potential area where buying pressures could intensify. 

1st support: 106.58
Supporting reasons: Identified as a pullback support close to the 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 108.50
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

EUR/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish continuation toward the 1st support. Additionally, when the price remains below the Ichimoku cloud, it’s typically seen as a strong bearish signal, indicating downward momentum.

Pivot: 1.0460
Supporting reasons: Identified as an overlap resistance close to the 38.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 1.0333

Supporting reasons: Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 1.0536
Supporting reasons:  Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

EUR/JPY:

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance

Pivot: 162.47
Supporting reasons: Identified as an overlap support. indicating a potential area where buying pressures could intensify.

1st support: 160.34

Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support once more.

1st resistance: 164.92
Supporting reasons: Identified as an overlap resistance close to the 78.6% and 50% Fibonacci projection, indicating a strong level of resistance.

EUR/GBP:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance

Pivot: 0.8270
Supporting reasons: Identified as an overlap support that aligns with the 50% Fibonacci retracement. indicating a potential area where buying pressures could intensify. 

1st support: 0.8223

Supporting reasons:  Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 0.8325
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

GBP/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support 

Pivot: 1.2614
Supporting reasons: Identified as a pullback resistance close to the 38.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify

1st support: 1.2486

Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support once more.

1st resistance: 1.2718
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

GBP/JPY:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish continuation toward the 1st resistance

Pivot: 195.84
Supporting reasons: Identified as an overlap support, indicating a potential area where buying pressures could intensify.

1st support: 193.26
Supporting reasons: Identified as an overlap support close to the 50% Fibonacci retracement, indicating a key level where price could find support once more.

1st resistance: 198.62
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

USD/CHF:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish breakout the pivot and rise toward the 1st resistance.  Additionally, when the price remains above the Ichimoku cloud, it’s typically seen as a strong bullish signal, indicating upward momentum.

Pivot: 0.9011
Supporting reasons: Identified as a swing high resistance. A breakout of this level indicating a potential area where buying pressures could intensify.

1st support: 0.8905

Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support once more.

1st resistance: 0.9097
Supporting reasons: Identified as a swing high resistance close to the 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

USD/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support 

Pivot: 157.71
Supporting reasons: Identified as a swing high resistance, indicating a potential area where selling pressures could intensify

1st support: 155.73
Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once again.

1st resistance: 159.33
Supporting reasons: Identified as an overlap resistance close to the 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

USD/CAD:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price has made a bullish reversal close to the pivot and could potentially rise towards the 1st resistance.

Pivot: 1.4350

Supporting reasons: Identified as a multi-swing-low support that aligns close to a 23.6% Fibonacci retracement, indicating a potential level where buying interests could pick up to resume the uptrend.

1st support: 1.4194
Supporting reasons: Identified as a pullback support that aligns with a 50% Fibonacci retracement, indicating a key level where price could find support.

1st resistance: 1.4447
Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

AUD/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 0.6265

Supporting reasons: Identified as a pullback resistance that aligns close to a 23.6% Fibonacci retracement, indicating a key area where selling pressures have intensified. The presence of a red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 0.6201
Supporting reasons: Identified as a multi-swing-low support, suggesting a potential area where price could find support once more.

1st resistance: 0.6349
Supporting reasons: Identified as a pullback resistance that aligns close to 38.2% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

NZD/USD

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 0.5662

Supporting reasons: Identified as a pullback resistance, indicating a key area where selling pressures have intensified. The presence of a red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 0.5553
Supporting reasons: Identified as a multi-swing-low support, suggesting a key support area where price could find support once again.

1st resistance: 0.5741
Supporting reasons: Identified as an overlap resistance that aligns close to a 38.2% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

US30 (DJIA):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 43,056.45

Supporting reasons: Identified as an overlap resistance that aligns close to a 38.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify. The presence of a red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 42,084.74

Supporting reasons: Identified as a swing-low support, indicating a potential level where price could find support once again.

1st resistance: 43,828.07

Supporting reasons: Identified as an overlap resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

DE40 (DAX):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 19,950.90
Supporting reasons: Identified as an overlap support that aligns close to a 38.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify. The presence of a red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 19,664.76

Supporting reasons: Identified as an overlap support that aligns with a 50% Fibonacci retracement, indicating a key level where price could find support once more.

1st resistance: 20,197.50
Supporting reasons: Identified as a pullback resistance that aligns with a 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price is trading close to the pivot and could potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 5,984.70

Supporting reasons: Identified as an overlap resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify. The presence of a red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 5,913.80

Supporting reasons: Identified as an overlap support that aligns with a 38.2% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance: 6,039.40
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bullish
Overall momentum of the chart: Neutral

Price has made a bullish reversal off the pivot and could potentially rise towards the 1st resistance.

Pivot: 92,791.73

Supporting reasons: Identified as an overlap support that aligns with a 38.2% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 86,424.63
Supporting reasons: Identified as a pullback support that aligns close to a 50% retracement Fibonacci, indicating a potential level where price could find support once again.

1st resistance: 99,216.35
Supporting reasons: Identified as an overlap resistance that aligns close to a 50% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 3,528.21

Supporting reasons: Identified as an overlap resistance that aligns close to a 38.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 3,219.55
Supporting reasons: Identified as an overlap support that aligns with a 50% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 3,742.62
Supporting reasons: Identified as a pullback resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 70.23
Supporting reasons: Identified as a swing-high resistance, indicating a potential area where selling pressures could intensify.

1st support: 68.95
Supporting reasons: Identified as an overlap support that aligns close to a 61.8% Fibonacci retracement, indicating a key level where price could find support once again.

1st resistance: 71.27
Supporting reasons: Identified as a -swing-high resistance, indicating a potential area that could halt any further upward movement.

XAU/USD (GOLD):

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 2633.36
Supporting reasons: Identified as an overlap resistance close to the 38.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 2571.77

Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support.

1st resistance: 2673.59

Supporting reasons: Identified as a pullback resistance close to the 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

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The post Tuesday 24th December 2024: Technical Outlook and Review first appeared on IC Markets | Official Blog.

Ministry of Finance statement, in brief:

• Will step up fiscal spending, accelerate spending in 2025
• China plans to intensify efforts to mitigate risks in key sectors, according to the Ministry of Finance.
• China will expand the issuance of government bonds to bolster economic stability.
• China aims to strengthen international financial collaboration.
• China is committed to fostering domestic demand growth – fiscal spending will focus more on people’s livelihoods and seek to boost consumption
• China pledges to promote a higher level of openness to the global economy.
• The Ministry of Finance will increase financial transfers to local governments to address and manage local debt risks effectively.
• Additional support will be provided for trade-in initiatives.
• Will increase basic pension for retirees, raise for both urban and rural residents

MoF comments are related to China’s National Fiscal Work COnference.

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

IC Markets Asia Fundamental Forecast | 24 December 2024

What happened in the U.S. session?

After rising steadily for two consecutive months, the Conference Board (CB) Consumer Confidence survey pulled back in December as concerns about the future returned. This index fell 8.1 points to 104.7 to mark the largest decline since July 2021 as consumers’ assessment of business conditions weakened while pessimism about future employment prospects returned after cautious optimism prevailed in October and November. Combined with durable goods which fell much more than originally anticipated, it was a poor set of results. New orders for goods dropped 1.1% MoM in November to mark the fourth decline in six months as categories such as transportation equipment, capital goods, and fabricated metal products led the slowdown. The dollar index (DXY) reached a high of 108.28 before sliding towards the 108-level as demand for the greenback waned following the release of the above data.

What does it mean for the Asia Session?

The Reserve Bank of Australia (RBA) will release its minutes from the board meeting that took place on 10th December where the central bank made a ninth consecutive pause – the official cash rate stands at 4.35%. The minutes could provide further insights into the deliberations that took place amongst board members as they arrived at the decision to keep rates on hold once more.

The Bank of Japan’s (BoJ) core CPI has moderated significantly lower throughout 2024, easing from 2.6% down to 1.5% YoY in November. The forecast for December points to an unchanged reading of 1.5% which could place further downward pressures on the yen and keep USD/JPY elevated. In addition, most financial markets will have an early close on Tuesday with Christmas falling on Wednesday so traders should prepare for unusually thin trading volume for the remainder of this week.

The Dollar Index (DXY)

Key news events today

Richmond Manufacturing Index (3:00 pm GMT)

What can we expect from DXY today?

The Richmond Manufacturing Index showed manufacturing activity in the Fifth District remaining sluggish in November but more businesses were optimistic that conditions would improve over the next six months. The composite manufacturing index remained unchanged at -14 in November while the forecast for December points to a slight improvement, with the index expected to print at -10. A weaker-than-expected result could create some headwinds for the greenback later today.

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

Richmond Manufacturing Index (3:00 pm GMT)

What can we expect from Gold today?

The Richmond Manufacturing Index showed manufacturing activity in the Fifth District remaining sluggish in November but more businesses were optimistic that conditions would improve over the next six months. The composite manufacturing index remained unchanged at -14 in November while the forecast for December points to a slight improvement, with the index expected to print at -10. A weaker-than-expected result could create some headwinds for the greenback later today.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

Monetary Policy Meeting Minutes (12:30 am GMT)

Christmas Eve Bank Holiday (All Day)

What can we expect from AUD today?

The Reserve Bank of Australia (RBA) will release its minutes from the board meeting that took place on 10th December where the central bank made a ninth consecutive pause – the official cash rate stands at 4.35%. The minutes could provide further insights into the deliberations that took place amongst board members as they arrived at the decision to keep rates on hold once more. The Aussie was trading around 0.6240 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

Christmas Eve Bank Holiday (All Day)

What can we expect from NZD today?

Just like its Pacific neighbour, New Zealand banks will be closed from 24th to 26th December in observance of Christmas. Trading activity is likely to be significantly muted this week – the Kiwi was trading around 0.5640 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

BoJ Core CPI (5:00 am GMT)

What can we expect from JPY today?

The Bank of Japan’s (BoJ) core CPI has moderated significantly lower throughout 2024, easing from 2.6% down to 1.5% YoY in November. The forecast for December points to an unchanged reading of 1.5% which could place further downward pressures on the yen and keep USD/JPY elevated.

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 Bullish

The Euro (EUR)

Key news events today

Christmas Eve Bank Holiday (All Day)

What can we expect from EUR today?

Most banks in Europe will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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

Christmas Eve Bank Holiday (All Day)

What can we expect from CHF today?

Most banks in Europe will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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 Bullish

The Pound (GBP)

Key news events today

Christmas Eve Bank Holiday (All Day)

What can we expect from GBP today?

Most banks in Europe will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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

Christmas Eve Bank Holiday (All Day)

What can we expect from CAD today?

Canadian banks will be closed from 24th to 26th December in observance of the Christmas holidays with trading activity likely to be significantly muted this week.

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 Bearish

Oil

Key news events today

API Crude Oil Stock (9:30 pm GMT)

What can we expect from Oil today?

After rebounding strongly on Friday, crude oil prices declined on Monday with WTI oil sliding nearly 0.5%. This benchmark fluctuated between $69.94 and $68.59 before closing at $69.24 per barrel. Concerns on weaker global demand and supply surplus in 2025 combined with a strong dollar have weighed on this commodity. WTI oil was hovering around $69.50 per barrel at the onset of the Asia session.

Next 24 Hours Bias

Medium Bullish

The post IC Markets Asia Fundamental Forecast | 24 December 2024 first appeared on IC Markets | Official Blog.

• MUFG Bank see potential for the euro to parity against the US dollar in the next 3 months
• UBS halved its expectation for Federal Reserve rate cuts in 2025, to 50bp only (from 100)
• Japan Finance Minister Kato verbal intervention effort trying to support the yen
• PBOC sets USD/ CNY reference rate for today at 7.1876 (vs. estimate at 7.3031)
• RBA December minutes: Upside inflation risks had diminished
• Bank of Japan October meeting minutes – more detail
• BoJ Oct minutes: If inflation trends align with expectations, gradual rate hikes possible
• UBS says the USD value is ‘stretched’, sell further strength and get into GBP and AUD
• The probability of the Fed hiking interest rates in 2025 is 40% (according to this guy)
• RBA publishing minutes of its pivot meeting on one of the thinnest liquidity days of year
• Forexlive Americas FX news wrap: Consumer confidence slumps
• Trade ideas thread – Tuesday, 24 December, insightful charts, technical analysis, ideas

USD/JPY
traded above 157.35 in morning Japan trade but the gains weren’t
sustained. We had some intervention-type comments from finance
minister Kato that saw the pair dribble back to
157.10 and thereabouts. That’s not much of a range really, and the
same can be said right across major FX.

The
USD gained a few ticks against EUR, AUD, NZD and CAD. Cable is more
or less unchanged on the session.

On
the central bank front we had October meeting minutes from the Bank
of Japan and December meeting minutes from the Reserve Bank of
Australia. There really wasn’t any surprise in either.

The
Bank of Japan emphasized its cautious approach to raising rates, that
it will do so at a moderate pace, and indicated those further hikes
will come as long as the economy, inflation and wages move along as
they expect.

The
minutes from the RBA confirmed the Bank’s pivot to being hawkish at the
December meeting, noting progress on inflation, although its still
above target, and fewer upside CPI risks. This was communicated on
the day of the meeting, nothing new.

For those celebrating on December 25, have a very Merry Christmas! Happy holidays to everyone else.

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

Japan Finance Minister Kato with some typical verbal intervention efforts:

• Says it is important for currencies to move in a stable manner reflecting fundamentals
• Recently seeing one-sided, sharp FX moves
• Concerned about recent FX moves
• Will continue to coordinate with overseas authorities on forex policies
• Will take appropriate action against excessive moves

Kato’s comments on renewed yen weakness.

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

UBS has reiterated its recommendation for investors to capitalize on further dollar strength by diversifying into other currencies.

Despite recent gains in the US dollar, driven by shifting expectations for Federal Reserve and US government policy, the bank maintains that the dollar remains overvalued.

While UBS does not anticipate a sharp decline in the greenback in the near term, it sees opportunities for investors to pivot toward more attractive currencies. Among its top picks are the

• British pound (GBP)
• and the Australian dollar (AUD),

which are favored for their potential to perform well as global monetary conditions evolve.

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

• US December consumer confidence 104.7 vs 113.3 expected
• US November new home sales +5.9% vs -14.8% prior
• US November durable goods orders -1.1% vs -0.4% expected
• Canada GDP for October 0.3% m/m vs 0.1% expected
• Canada November PPI +2.2% vs +1.1% y/y prior

Markets:

• Gold down $10 to $2610
• Bitcoin down 3% to $93,800
• US 10-year yields up 6 bps to 4.58%
• WTI crude flat at $69.50
• S&P 500 up 0.7%
• USD leads, CHF lags

The final week of the year started off with mixed signals. The equity market continued its rebound from the post-Fed rout as the Nasdaq rose 1%. It didn’t start out that way as futures pointed to a lower open, but Santa Claus might arrive after all, with steady bids throughout the day, particularly after Europe went offline.

Unfortunately, the Christmas cheer didn’t spread to bonds or FX. Yields rose across the curve with 10s and 30s up to the highest since May. That underpinned a US dollar bid early in the day, though it faded some what on a better risk trade later.

Economic data didn’t appear to have a large effect but there was a solid schedule as stats agencies rush to publish ahead of the holiday. US consumer confidence saw a sharp drop in lower expectations, highlighting some angst about Trump policies.

For the euro, yen and pound it was mostly sideways trading in North America after earlier moves lower in the trio. It was the commodity currencies that came to life late in solid rebounds that erased earlier losses. The loonie got a better October GDP number but the November monthly reading was negative, highlighting the risks headed into the new year.

Have a Merry Christmas!

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