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Sterling FX traders have had a busy time over the past couple of trading sessions, reacting to a more hawkish Federal Reserve. Cable now sits at a crucial technical level ahead of the key Bank of England rate decision later today. The Monetary Policy Committee (MPC) is widely expected to hold rates steady at 4.75% after recent inflation data confirmed that both core prices and wages remain ‘sticky’ in the current environment. The market is now pricing in the next rate cut from the Bank to come in May, whereas March had been anticipated less than a week ago. While there had been some hope for cuts as GDP data confirmed significant growth slowing, most traders expect inflation considerations to dominate today’s decision.

Trading opportunities are likely to arise from the message conveyed in the statement and the MPC’s Official Bank Rate Votes. As seen earlier today, any surprises could trigger sharp market movements. A more dovish tone would likely open the way for a downward move, and given the Fed’s overnight update, this could lead to a break of the long-term trendline support and a test of annual lows. Conversely, a more hawkish stance could prompt a relief rally, although this is expected to be limited due to the prevailing bullish sentiment towards the dollar.

Resistance 2: 1.3348 – Trendline Resistance

Resistance 1: 1.2815 – 200-Day Moving Average

Support 1: 1.2555 – Trendline Support

Support 2: 1.2484 – 2024 Low

The post Trade Cable on the Bank of England Rate Decision first appeared on IC Markets | Official Blog.

US Stocks Smashed After Hawkish Fed Cut – Nasdaq Down 3.5%

It was a sea of red on Wall Street today as the Federal Reserve delivered a more hawkish rate cut than expected. While the Fed reduced rates by 25 basis points, adjustments to the dot plot and accompanying statements now indicate only two cuts in 2025, down from the previously anticipated three. The markets have reacted sharply. US stock indices were hit hard, with the Dow falling 2.58%, the S&P dropping 2.95%, and the Nasdaq closing 3.56% lower.

The US dollar surged following the Fed’s announcement, with the DXY index gaining over 1% on the day. Treasury yields also climbed to multi-week highs, with the 2-year yield rising by 10.4 basis points to 4.348% and the benchmark 10-year increasing by 11.3 basis points to 4.512%.

Oil prices were relatively stable, with weaker US inventories offsetting the Fed’s hawkish tone. Brent crude slipped 0.36% to $72.93, and WTI fell 0.11% to $70.03. In contrast, gold prices plummeted in response to the stronger dollar, with the precious metal closing the New York session down 2.25% at $2,587.44 an ounce.

Greenback Surges Higher After Hawkish Fed

The US dollar surged across the board in the wake of the Fed’s 25-basis point rate cut, which came with a distinctly hawkish tilt. The DXY index is up more than 1% on the day, trading at levels not seen since November 2022. Major currencies are approaching or breaking into new ranges, with the AUD, CAD, CHF, and NZD already trading at annual lows against the dollar.

In the coming sessions, traders will closely monitor the euro and pound sterling, both of which are at key technical levels. Breaks at these levels during the Asian market open could trigger even stronger moves in subsequent sessions.

More Central Banks in Focus Today

The market remains on edge following the Federal Reserve’s announcement and is now gearing up for a busy day ahead, with further central bank updates likely to sustain elevated volatility.

The Asian session begins with New Zealand GDP figures released early in the day, followed by the Bank of Japan’s key rate decision. The BOJ is widely expected to hold rates steady, but any shift in guidance could prompt sharp market movements.

Attention will then turn to the UK as the Bank of England announces its Official Bank Rate midway through the London session. While no change in rates is anticipated, sterling is expected to remain volatile around the announcement.

Later in the New York session, US data releases—including Final GDP, weekly unemployment claims, and the Philly Fed Manufacturing Index—are scheduled. However, the impact of the Federal Reserve’s hawkish stance is expected to dominate market sentiment throughout the day.

The post General Market Analysis – 19/12/24 first appeared on IC Markets | Official Blog.

South Korean Finance Minister :

• will take market-stabilising measures if volatility is excessive
• will prepare FX stability and liquidity measures in 2025 policy plan

SK is recovering from the short-lived imposition of martial law. Financial markets there were rattled.

The FOMC / Powell on Wednesday have seen KRW slide further (against the rampan US dollar).

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

Capital Economics on the NZ data

• “It was dramatically worse than anyone had expected,”

and what it means for the Reserve Bank of New Zealand:

• “Given the dire state of the economy, we now think risks
  are tilted towards a
  larger 75bp cut in February.” he added.
  “We’re more
  convinced than ever that the Bank will cut rates
  below neutral,
  eventually to 2.25%.”

The remarks from CE come via Reuters reporting on the dreadful data from NZ earlier. ICYMI:

• New Zealand Q3 GDP -1.0% q/q (vs. -0.4% expected)
• New Zealand dollar falls even further after GDP plunges

NZD/USD update, hitting its lowest since October 2022:

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

NZ economic growth data – gross domestic product (GDP) – contracted further in the September quarter:

• New Zealand Q3 GDP -1.0% q/q (vs. -0.4% expected)

Q2 showed contraction also, thus cementing two straight quarters of decline. This is the widely-accepted definition of recession.

NZD/USD had been falling, extended lower still:

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

Ishiba wants to meet with the incoming US president. Discussions will centre on economic issues, particularly tariffs.

Meanwhile, its BOJ day:

• Economic calendar in Asia – Do you know what time the BoJ announcement is? Read on!

During Trump’s first term Japan PM Abe was a strong partner.

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

New Zealand Q3 economic growth data is just awful – a much larger contraction than was expected.

New Zealand Q3 2024 GDP Performance:

• GDP Decline: The economy contracted by 1.0% in Q3 2024, following a revised 1.1% decrease in Q2 2024.
• Revision of Q2 Data: The Q2 contraction was revised downward due to updated annual data, which also showed stronger growth over the past year despite recent declines.
• Per Capita GDP: Fell by 1.2% in Q3 2024, marking the eighth consecutive quarterly decline.

Sectoral Highlights:

• Declines: Activity fell in 11 of the 16 industries:
  • Largest declines: Manufacturing, business services, and construction.
  • Goods-producing and service industries: Decreased.
• Increases:
  • Primary industries, led by agriculture (particularly dairy farming).
  • Rental, hiring, and real estate services also showed gains.

Expenditure Measure of GDP:

• Fell 0.8% in Q3 2024, matching the revised decline in Q2.
• Household Consumption: Decreased by 0.3%, driven by reduced spending on essentials (e.g., groceries and electricity).
  • Spending increases: Durable goods like motor vehicles, audio-visual equipment, and phones.

Insights:

• The manufacturing sector experienced the sharpest decline, with nearly all sub-industries reporting reduced output.
• Agriculture growth, fueled by dairy farming and exports (milk powder, butter, cheese), partially offset broader economic declines.
• Changes reflect an evolving economic structure, updated annually in line with international best practices.

This data underscores significant economic challenges in New Zealand, with declines across most sectors and reduced household consumption.

This data keeps the Reserve Bank of New Zealand on track for further interest rate cuts in 2024. The Bank next meets on February 19. That is LONG time away.

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

Vance’s post seems a bit muddled, but the gist of it is he and Trump want to pump up US debt even further, with an increase to the debt ceiling.

Congress have not been discussing a debt ceiling hike, Trump’s proposal opens a whole new can of worms. The prospect of a shutdown have now increased markedly. Two days to go.

.

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

Economic growth data for Q3 2024 is due from New Zealand at 2145 GMT, which is 1645 US Eastern time.

New Zealand’s economic performance in the first half of 2024 was modest, with slight fluctuations in GDP.

First Quarter (Q1) 2024:

• GDP Growth: The economy experienced a 0.2% increase in GDP during the March 2024 quarter, rebounding from a 0.1% decline in the December 2023 quarter.

Second Quarter (Q2) 2024:

• GDP Contraction: In the June 2024 quarter, GDP contracted by 0.2%, with per capita GDP decreasing by 0.5%.

• Annual Perspective: For the year ending June 2024, GDP declined by 0.5%, and per capita GDP fell by 2.7%.

• Sector Performance: The contraction was attributed to declines in several major industries, including retail trade, accommodation, agriculture, forestry, fishing, and wholesale trade.

Q3 data is expected to show continuing contraction, despite the Reserve Bank of New Zealand (RBNZ) implementing a series of interest rate cuts, reducing the Official Cash Rate (OCR) from 5.5% in August to 4.25% by November, and now to 4.25% in December. The impact on Q3 2024 GDP data is likely to be limited due to inherent policy transmission lags and concurrent economic challenges. The full benefits of these monetary policy adjustments are expected to materialize in subsequent quarters.

Economists suggest that the September quarter may represent the low point of the current economic cycle. There is optimism for a modest recovery in the December quarter, with expectations of more robust growth emerging in 2025 as the effects of the RBNZ’s monetary easing become more pronounced. The anticipated recovery is expected to be supported by increased consumer spending and business investment, spurred by lower borrowing costs.

***

More:

• Immediate Effects: The transmission of monetary policy to the broader economy typically involves a lag. Given that the most recent rate cuts occurred during Q3, their full impact may not be immediately evident in the GDP figures for this quarter. However, early indicators suggest that sectors sensitive to interest rates, such as construction and manufacturing, have begun to stabilize.

• Sectoral Performance: Despite the rate cuts, the economy faced challenges in Q3. Analysts anticipated a contraction of approximately 0.4% in GDP for the September quarter, with declines observed in construction, wholesale trade, and manufacturing. These sectors were adversely affected by an energy crunch during the winter months, which compounded existing economic pressures.

• Consumer Spending and Business Investment: While lower interest rates are designed to encourage spending and investment, the immediate response from consumers and businesses has been cautious. High levels of household debt and global economic uncertainties have led to restrained expenditure, potentially dampening the short-term stimulative effect of the rate cuts.

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

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

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

The major US stock indices fell sharply after the Fed signaled less easing in 2025. The end of your target for the Fed funds is now 3.9%. It was a 3.4% after the September meeting.

• The Dow industrial average is now down for 10 consecutive days. It’s decline for today is its worst single day since August 5 when the index fell -2.6%. The fall today was just above that level
• The S&P index fell at its worst day also since August 5 when the index fell -3.0%.
• The NASDAQ index had its worst day since July 24 when the index fell -3.64%

A snapshot of the final numbers shows:

• Dow industrial average fell -1123.46 points or -2.58% at 42326.44
• S&P index fell -178.58 points or -2.95% at 5872.04.
• NASDAQ index fell -716.37 points or -3.56% and 19392.69..

The small-cap Russell 2000 fell 1 or 2.56 points or -4.39% at 2231.51.

After the close Micron Technology EPS came in at $1.79 versus $1.77. Revenues were at $8.7 billion is expected $8.7 billion. Although earnings and revenues came in as expected the stock is getting hit hard and down -16.80%. That comes after its shares fell -4.33% on the day.

Guidance for Q2 was light of expectations with revenues at 7.7 – $8.1 billion versus expected $8.99 billion. Adjusted earnings-per-share expected $1.33– $1.53 versus expected $1.92. The company said they expect to return to growth in second half of the fiscal year.

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

I get the question a lot, “What time is the Bank of Japan announcement due?”

The answer is always the same, the BoJ doesn’t have a scheduled time for their Statement, never do.

Experience indicates to expect it sometime in the 0230 – 0330 GMT (2130-2230 US Eastern time) time window.

Bank of Japan Governor Ueda will follow up with a press conference. This is scheduled. At 0630 GMT (0130 US Eastern time).

The BoJ is widely expected to leave rates on hold today.

Earlier previews:

• BOJ is expected to hold its policy rate at 0.25% in its December 18-19 meeting – preview

• BOJ reportedly sees little cost to waiting for next rate hike
• BOJ reportedly erring towards keeping interest rates unchanged
• BOJ reportedly considers skipping rate hike
• BOJ to raise interest rate to at least 0.50% by end-March, 51 of 52 economists say
• Goldman Sachs expect the Bank of Japan to remain on hold at 0.25% at the December meeting

• This snapshot from the ForexLive economic data calendar, access it here.
• The times in the left-most column are GMT.
• The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.
• I’ve noted data for New Zealand and Australia with text as the similarity of the little flags can sometimes be confusing.

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