Forexlive Americas FX news wrap 19 Dec: BOE keeps rate unchanged but is more dovish

• US broader indices give up gains and close lower on the day
• New Zealand December consumer confidence jumps into optimism! 100.2 (prior 99.8)
• Republican Congressman Tom Cole says there’s an agreement on a stopgap funding bill
• Crude oil futures settles at $69.38, down -$0.64 or 0.91%
• Mexico central bank cuts its benchmark interest rate to 10% from 10.25%
• Bitcoin moving down and away from $100K
• US sells 5 year TIPS at 2.121% vs WI at 2.065% at the time of the auction
• Deutsche Bank says the Fed won’t cut rates in 2025
• US 30 year mortage rate rises to 6.72% from 6.60% last week.
• Canadian Prime Minister Justin Trudeau to further shuffle cabinet on Friday
• European equity close: DAX falls back below 20,000
• Trump says he wants the debt ceiling eliminated or extended
• The question hanging over the market: What are Trump’s real priorities?
• BOE’s Bailey: Market rate pricing for February is in a reasonable place
• US November existing home sales 4.15m vs 4.07m expected
• The lesson from Powell: It’s kind of fallen apart
• US Q3 final GDP +3.1% vs +2.8% expected
• December Philly Fed manufacturing index -16.4 vs +3.0 expected
• US Initial jobless claims 220K vs 230K estimate
• What is moving in the markets today? A technical look at the 3 major currency pairs
• ForexLive European FX news wrap: Yen tumbles on Ueda, BOE keeps rates steady
• BOE leaves bank rate unchanged at 4.75%, as expected

Markets:

• Crude oil $69.14 down -$0.88 or -1.26%
• Gold up $8.98 or 0.35% at $2593
• Silver -$0.30 or -1.07% at $29.02
• Bitcoin down -$2,300 at $97,611

In the US stocks, the broader indices gave up gains and closed lower, but the Dow snapped a 10 day losing streak and is closing higher.

• Dow up 15.37 points or 0.04% at 43,342.24
• S&P fell -5.08 poiints or -0.09% at 5867.08
• Nasdaq fell -19.92 points or -0.10% a 18,372.77

In the US debt market :

• 2 year 4.316%, down -4.3 bps
• 10 year 4.57%, up 5.0 bps
• 30 year 4.744%, +6.5 bps

European indices closed sharply lower:

• German Dx, -1.35%
• France’s CAC -1.22%
• UK FTSE 100, -1.14%
• Spain’s Ibex -1.52%
• Italy’s FTSE MIB -1.78%

In the forex, the USD is mixed with the greenback higher vs the JPY the biggest mover (by 1.69%. The dollar also rose vs the GBP (by 0.60%). Both the BOJ and BOE kept rates unchanged but the moves were considered more dovish sending the JPY and the GBP lower.

The BOE kept rates unchanged. The surprise was the vote which had 3 dissenters who wanted to cut rates. That has sent the GBPUSD back lower (the USD higher) after the pair had moved higher in the early European session. Below are the main points from the BOE statement this morning.

• Bank rate vote 6-3 vs 8-1 expected (Dhingra, Ramsden, Taylor voted to cut bank rate by 25 bps)
• A gradual approach to removing monetary policy restraint remains appropriate
• We can’t commit to when or by how much we will cut rates in 2025 as economic uncertainty is high
• Services consumer price inflation has remained elevated
• Remaining domestic inflationary pressures are resolving more slowly
• Most indicators of UK near-term activity have declined
• Labour market is broadly in balance

The GBPUSD which snapped back higher to test the 100-hour MA (and swing area) near 1.2660 in the European morning session, turned lower after the decision, fell below the low from the Asian session at 1.2563 and accelerated the decline until it reached the lows from November (lowest level since May) at 1.24865. The low for the day reached 1.2494 with the price currently trading near that level going into the new trading day. Going into the new day, that level will be a barometer for the buyers and the sellers.

The Bank of Japan also met today and they too kept rates unchanged. BOJ Ueda said:

• Japan economy is recovering modestly, although some weakness seen
• Hard to say if incoming data will be sufficient to support January hike
• Need more data on wages (which may imply waiting on hikes).
• Need to gauge situation for quite a while on both wages and possible Trump tariffs
• If we decide not to hike, we will consider that decision as a safe one
• There is of course the risk of falling behind the curve in waiting
• But we will consider said risk if we were to decide to skip a rate hike in January

The comments sound like there will be no rise in rates soon, and as a result, the USDJPY moved higher (lower JPY). The price extended to the next target area between 157.66 and 158.42 on the daily chart where the buying slowed, but so far the modest correction has been able to stay above close support near 157.10 (the low reached 157.30. Watch the 157.10 level for a close and short term bias defining level after the trend move higher today.

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