General Market Analysis – 20/12/24

Markets Calm After Fed Storm – Nasdaq off 0.1%

US stock markets had a bit of a breather yesterday after Wednesday’s volatile post-Fed moves. All three major indices closed close to flat: the Dow added 0.04%, the S&P lost 0.09%, and the Nasdaq fell 0.1%. The US Treasury yield curve steepened, with the 2-year yield losing 3.8 basis points to move back to 4.317%, while the 10-year benchmark moved 4.8 basis points higher to 4.562%. The dollar continued to push higher, although much slower than its post-Fed surge, with the DXY gaining 0.27% to close at 108.40. Oil prices fell again as future demand concerns continued to weigh, with Brent down 0.95% to $72.69 and WTI down 0.91% to $69.38. Gold had a lively day as well, ultimately recovering a small amount of the previous day’s loss, closing up 0.24% at $2,593.05.

Cable to Weaken After Dovish Bank of England

It has been a near-perfect storm for Cable bears over the last few trading sessions as both associated central banks have pushed the major currency pair lower. Cable was on the back foot into yesterday’s Bank of England rate call after the Fed produced a hawkish cut the previous day. When the MPC held rates as expected, but the rate vote showed that 3 members (not the expected 2) had pushed for a cut, we saw a further extension of the move south. The market is now pricing in 55 basis points worth of cuts next year, compared to 45 basis points before the decision, and traders will be looking for levels to sell in the coming days. Cable has found some support near the November low, but a break lower now opens the way for a move to challenge the annual low at 1.2296 before the end of the year.

Another Busy Calendar Day to See Out the Week

It’s another full calendar day today to close out the week, with macroeconomic events scheduled across all three trading sessions. Chinese markets are in focus in the Asian session, with the key Loan Prime Rates updates scheduled for midway through the day, with investors again hoping for some stimulus for the world’s second-largest economy. Another day and another data release from the UK once Europe comes into play, with Retail Sales numbers due out early in the session. The expectation is for a 0.5% increase in the month-on-month data, and a miss here could see Cable drop hard. The US day kicks off with focus north of the border on Canadian Retail Sales, but US Core PCE data is set to dominate overall market sentiment as we move into the final trading session of a volatile week.

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