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Trump says he wants the debt ceiling eliminated or extended

December 19, 2024 23:39   Forexlive Latest News   Market News  

I mean, he’s kind of giving up the playbook here, no?

Democrats still control the Senate so they can toss him this grenade. It would also be very difficult for many Republicans to vote to eliminate the debt ceiling.

Overall though, I think markets should feel better about what Trump’s real priority is after seeing this. If he wants the debt limit gone, it’s not because he’s planning to be a real fiscal hawk. He’s trying to get some kind of cover for the elimination of the debt ceiling under Biden so he can run up deficits.

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

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Pound falls to a fresh low of the day as the US dollar climbs

December 19, 2024 23:30   Forexlive Latest News   Market News  

The pound is flirting with the lows of the day and the lows of the month as the US dollar broadly strengthens.

This four-hour chart is looking like a head-and-shoulders that would target 1.23 or at least the November lows.

The Bank of England vote today was more-dovish than anticipated but the market is still only pricing in 54 bps in easing next year. I think the UK CPI reports in the months ahead will be some of the most market-moving of any global economic data released next year. There is a real concern about inflation at the BOE but if that fades, then they have lots of room to cut, and fast.

The latest move though is mostly about the dollar as it strengthens due to middling bounce back from risk assets. The dollar is also getting heavy bids via USD/JPY which is absolutely soaring today after the BOJ left rates on hold.

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

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The question hanging over the market: What are Trump’s real priorities?

December 19, 2024 23:00   Forexlive Latest News   Market News  

US President-elect Donald Trump has expressed four priorities for his time in the White House:

  1. Strong GDP growth
  2. Lower fiscal deficits
  3. Improved trade deficits
  4. A higher stock market

The problem is that you can’t have all those things. One way that Scott Bessant might be mulling is via a weaker dollar but that doesn’t look like it’s coming any time soon.

So you have to decide which one Trump prioritizes.

Since election night, that’s been an easy call for nearly everyone: The stock market. The sense was that Trump couldn’t stomach the pain of a real fiscal or trade fight because of what it would do to stocks.

So the sense was that deficits would stay high or maybe go even higher with a corporate tax cut and stocks would continue to rise.

That might not be the case. All the blame for Wednesday’s market meltdown is being directed at the Federal Reserve but I think that’s a mistake. The other big event on the day was that the Congressional stop-gap funding bill fell apart.

Leading the charge to kill it was Elon Musk, who has been Trump’s right-hand man since election night.

So while Trump’s priority might be the stock market, Musk appears to really believe he can slay government spending and is directing the whole weight of his $44 billion Twitter buy-out towards it.

If Musk continues to dominate Congress, then it might put the fiscal hawks in control.

Now ultimately, I think Trump tires of falling stocks and dumps Musk but it will be important to watch what happens in the spending package next and see how Republicans handle their narrow Congressional majority. If the stock market isn’t Trump’s top priority then there will be major pain to come.

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

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G7 is considering a full ban on handling Russian crude – report

December 19, 2024 22:30   Forexlive Latest News   Market News  

Bloomberg reports that the G7 is considering hardening the price cap on Russian oil and is even considering replacing the mechanism with a full ban on handling Russian crude.

The market may get excited about this but I don’t think it’s a real threat.

“Options under consideration range from essentially replacing the
mechanism with a full ban on handling Russian crude to lowering the
price threshold from the current $60 to about $40, the people said. The
people, who spoke on condition of anonymity to discuss sensitive talks,
cautioned that discussions were ongoing and there’s no consensus yet on a
next step.”

So far the price cap has been a near-total failure with Russian oil flowing freely.

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

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US November existing home sales 4.15m vs 4.07m expected

December 19, 2024 22:14   Forexlive Latest News   Market News  

  • Prior was 3.96m
  • Sales % vs +3.4% prior
  • Sales -4.2% vs +2.9% y/y prior
  • Inventory vs 4.2 months prior
  • Median prices $ vs $407,200 prior
  • Prices +% vs +4.0% y/y prior

US 30-year mortgage rates are flirting with 7% again and that’s not a good sign for the housing market.

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

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The US equity bulls will try to make a stand here

December 19, 2024 21:14   Forexlive Latest News   Market News  

S&P 500 futures are up 0.8% and Russell 2000 futures are up 1%.

Both of those moves only recover a small portion of the rout yesterday and they look vulnerable to further selling especially with 10-year yields breaking the November highs.

It’s certainly a gut-check day and I think price action will reveal where the strong hands are located.

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

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December Philly Fed manufacturing index -16.4 vs +3.0 expected

December 19, 2024 20:39   Forexlive Latest News   Market News  

  • Prior was -5.5
  • New orders: -4.3 vs +8.9 prior
  • Shipments: -1.9 vs +4.5 prior
  • Unfilled orders: +18.9 vs +6.8 prior
  • Delivery times: +11.6 vs -2.1 prior
  • Inventories: -2.3 vs +5.4 prior
  • Prices paid: +31.2 vs +26.6 prior
  • Prices received: +7.3 vs +14.3 prior
  • Employment: +6.6 vs +8.6 prior
  • Average workweek: -8.2 vs +17.4 prior
  • Six month index +30.7 vs +56.6 prior

Responses to the December Manufacturing Business
Outlook Survey suggest a decline overall in regional
manufacturing activity this month. The indicator for current
activity remained negative, while the new orders and
shipments indexes declined and turned negative. On
balance, the firms indicated an increase in employment and
continued to report increases in prices. The survey’s broad
indicators for future activity continue to suggest widespread
expectations for growth over the next six months.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

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US Q3 final GDP +3.1% vs +2.8% expected

December 19, 2024 20:39   Forexlive Latest News   Market News  

Details:

  • Consumer spending +2.8% vs +3.5% second reading
  • Consumer spending on durables +7.6% vs +8.1% second reading
  • GDP final sales +3.3% vs +3.0% second reading
  • GDP deflator +1.9% vs +1.9% second reading
  • Core PCE +2.2% vs +2.1% second reading
  • Corporate profits after tax -0.4% vs 0.0% second reading
  • Business investment (nonresidential fixed investment) +4.0%

Contributors and subtractors to growth:

  • Consumption: +2.48 pp vs +2.37 pp second reading
  • Government: +0.86 pp vs +0.83 pp second reading
  • Net International trade: -0.43 pp vs -0.57 pp second reading
  • Inventories: -0.22 pp vs -0.11 pp second reading

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

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US Initial jobless claims 220K vs 230K estimate

December 19, 2024 20:39   Forexlive Latest News   Market News  

  • Prior week 242K
  • Initial jobless claims 220K vs 230K estimate
  • 4-week moving average of the initial jobless claims 225.50K vs 224.25K last week
  • Prior week continuing claims 1.886M revised to 1.879M last week.
  • Continuing Claims for the current week 1.874M vs 1.890M est.
  • 4-week moving average of the continuing claims 1.880M vs 1.886M last week

The weekly data dips back to the downside after the spike higher last week. It seems the data might be impacted by the calendar or other external factors causing some volatility in the short term.

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

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What is moving in the markets today? A technical look at the 3 major currency pairs

December 19, 2024 20:30   Forexlive Latest News   Market News  

The Fed cut rates, BUT they took back 2 of 4 cuts expected in September (only expect 2 cuts in 2025). As a result, the market is only pricing in an 8% chance of a cut in January and only 35 basis points of cuts by the end of 2025 (even more hawkish than the Fed).

  • The dollar moved higher closing the day near the highs for the major currency pairs.

The US stocks moved sharply lower yesterday:

  • 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 index fell -2.58%
  • The S&P index fell at its worst day also since August 5 when the index fell -3.0%. The index fell -2.95%.
  • The NASDAQ index had its worst day since July 24 when the index fell -3.64%. The index fell -3.56%

Add the fall in the Russell 2000 which fell -4.39% and it was a bad day

US yields moved higher with double-digit gains in the 2 year (Up 11.2 bps to 4.359%), and the 10 year (up 12.5 bps to 4.52%).

In trading today, the USD is mixed (and volatile), US futures are implying a higher open (S&P up 39 points, the Dow up 257, and the Nasdaq up 150 points), the US yields are mixed with the 2 year down a couple basis points and the 10 year up about 4 basis points.

The Bank of Japan 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

It sounds like no rise and the USDJPY is moving higher (lower JPY) as a result.

The BOE kept rates unchanged as well. 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

Taking a snapshot of the major currency pairs vs the USD, the USD is higher vs the JPY by 1.34%, but lower vs the other currencies with declines of -0.53% vs the AUD –0.59% vs the CHF, -0.58% vs the CAD and -0.59% vs the NZD.

The video below outlines the technicals in play vs the 3 major currency pairs – the EURUSD, USDJPY and GBPUSD after the fireworks over the last 18 or so hours of trading.

VIDEO IS COMING……

In other markets this morning:

  • Crude oil is down $-0.23 or -0.33% at $69.73
  • Gold is trading up $21 or 0.0% at $2605 after tumbling $-61 during yesterday’s trading
  • Bitcoin is trading up about $1700 a $101,925

On the economic calendar today,

  • GDP final for Q3 is expected 2.8%
  • Initial jobless claims are expected and 230K with continuing claims expected at 1.890M
  • Philly Fed is index expected at 3.0 versus -5.5 last month
  • Existing home sales is expected to rise to 4.07M from 3.96M last month (10 AM ET)
  • Canada’s average weekly earnings for October will be released at 8:30 AM. Last month it came in at 5.16%

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

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A jump in initial jobless claims would be just perfect

December 19, 2024 20:15   Forexlive Latest News   Market News  

We get a trio of economic data releases at the bottom of the hour including US initial jobless claims (shown above), the Philly Fed and final Q3 GDP.

The one to focus on is claims. It caught the market off guard with a jump last week, though it looks like it was due to one-off events. The consensus is for a decline back down to 230K but a further rise would be an interesting development. Powell tilted the Fed’s focus back towards the inflation mandate yesterday and this would make for a perfect time for a rug pull on jobs, at least if you enjoy maximum chaos.

Note that this is NFP survey week as well, so the claims number could be particularly impactful.

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

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ForexLive European FX news wrap: Yen tumbles on Ueda, BOE keeps rates steady

December 19, 2024 19:45   Forexlive Latest News   Market News  

Headlines:

Markets:

  • CHF leads, JPY lags on the day
  • European equities lower; S&P 500 futures up 0.7%
  • US 10-year yields up 4.4 bps to 4.542%
  • Gold up 1.0% to $2,612.73
  • WTI crude down 0.2% to $70.42
  • Bitcoin up 1.3% to $102,276

It was a modestly eventful session as market players dealt with two more major central bank decisions today after the Fed yesterday.

The post-Fed moves were faded somewhat with the dollar retracing gains alongside a minor bounce in US futures on the day. But after the BOJ decision earlier to keep interest rates unchanged, governor Kazuo Ueda sent a clear message that they are willing to kick the can down the road to March before hiking next.

And that sent USD/JPY running higher early on in the session from 155.50 all the way up to a high of 157.15 before settling just under 157.00 currently. Ueda’s point is that they don’t have enough information on wage trends and there is much uncertainty on Trump’s tariffs to come. Both of which will almost surely not be that much changed by January.

Outside of that though, the dollar struggled to maintain gains from yesterday as we see a retracement across the board.

EUR/USD moved up from 1.0360 to 1.0400 while USD/CAD dipped from 1.4430 to 1.4375 during the session. Even the antipodes managed a bounce with AUD/USD finding buyers at key support at 0.6200 to 0.6250 currently.

GBP/USD managed a modest bounce to 1.2660 levels before being pulled back to around 1.2630. And then we had the BOE policy decision, which saw three policymakers dissent in favour of a 25 bps rate cut – as opposed to just Dhingra. That pinned cable down to 1.2605 currently, though still up 0.3% on the day.

In other markets, European indices are down roughly by 1% across the board in catching up to Wall Street losses yesterday. That said, the selling isn’t as bad as US futures are catching a minor bounce with S&P 500 futures seen up 0.7% today. It’s still early in the day though as Wall Street is a different beast as seen several times already this week.

As for bonds, short-end yields are down slightly but the long-end continues to sell off with 10-year yields in the US now rising to 4.54%. It’s certainly something to keep an eye out for as we look towards the closing stages this week and into the new year.

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

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