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Market participants anticipate minimal surprises from the central bank, expecting rates to remain steady while hinting at gradual hikes in 2025. The Fed's recent 25 basis point cut has shifted projections, now favoring two cuts in 2025 and two in 2026, amid rising inflation and growth forecasts.The hawkish tone from the FOMC meeting led to a sell-off on Wall Street, with Treasury yields surging and the US dollar reaching its highest level since November 2022. Asian markets followed suit, with the Nikkei 225 testing key support levels as traders await the Bank of Japan's upcoming meeting.
Market participants are adopting a defensive stance ahead of the Federal Reserve and Bank of Japan meetings, with expectations for a 25 basis point rate cut from the Fed to return rates to neutral amid rising unemployment and stagnant inflation. The US dollar shows resilience despite less hawkish Fed rate bets, while the EUR/USD faces downside risks unless it breaks above 1.062. Meanwhile, diminished BoJ rate-hike expectations are weighing on the yen, with USD/JPY maintaining upward momentum within a rising channel.
Bitcoin is trading above $103,000, buoyed by strong market sentiment, but faces potential volatility this week due to key economic events, including the Federal Reserve's expected interest rate cut and U.S. economic data releases. Central bank decisions in Japan and the U.K. will also play a crucial role, with any unexpected shifts likely to impact Bitcoin's price. Traders are closely monitoring macroeconomic developments, particularly the psychological $100,000 level, as they assess the market's risk appetite.
Most Asian stocks declined ahead of the U.S. Federal Reserve's interest rate decision, with Chinese shares falling due to disappointing retail sales data, raising concerns about the economy's recovery. Japan's market remained stable as the Bank of Japan is expected to maintain current rates, while South Korea's index showed little change following the president's impeachment. Overall, investor sentiment was cautious globally as markets awaited clarity from the Fed amidst persistent inflation concerns.
Asia begins the final trading week of 2024 with a focus on the monthly 'China data dump' and central bank decisions, including a likely rate cut from the Federal Reserve. Investors remain optimistic amid easing monetary policies, while the Bank of Japan may consider a rate hike following positive business surveys. Key Chinese economic indicators, including industrial production and retail sales, are set to be released, alongside concerns over the South Korean won following President Yoon Suk Yeol's impeachment.
US stocks declined following mixed inflation reports and rising jobless claims ahead of the FOMC meeting. The ASX 200 also pulled back as strong labor data diminished expectations for an RBA rate cut. Key economic indicators are set for release next week, including US retail sales and central bank meetings in Australia, Japan, and the UK.
Wall Street paused amid a higher-than-expected US producer price index and weaker jobless claims, yet a year-end rally remains possible. Key events include the Fed's anticipated 25 bp rate cut, the BoJ's potential rate hike with dovish guidance, and the BoE's expected hold at 4.75%. Additionally, the US core PCE price index is projected to rise to 2.5% in November.
The Bank of Japan's monetary meeting on December 18-19, 2024, is poised for a potential rate hold at 0.25%, but strong forward guidance for a January hike is anticipated. Recent inflation dynamics and economic resilience support the case for tightening, while the strengthening yen reduces immediate urgency for action. The decision may hinge on balancing clear communication with market expectations to avoid surprises.
The Nikkei index rose 1.4% to 39,906.84 points, reaching a two-month high, driven by positive US inflation data that bolstered expectations for a Federal Reserve rate cut. The broader Topix also increased by 1.1% to 2,778.63 points. Market analysts anticipate a Bank of Japan rate hike by January, with its monetary policy decision due next week.
The Bank of Japan is expected to maintain its short-term interest rate at 0.25% during its December meeting, with strong forward guidance hinting at a potential hike in January. Recent inflation data and a notable increase in base salaries suggest conditions are ripe for a rate increase, despite a resilient economic backdrop. The upcoming decision may focus on clear communication to manage market expectations, particularly following past criticisms of the BoJ's messaging.
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