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The Bank of Japan raised its key interest rate by 25 basis points to 0.5%, the highest in 17 years, amid rising inflation and wages. The central bank's core inflation forecast for fiscal 2024 increased to 2.7%, while the USD/JPY currency pair's future will hinge on U.S. tariff decisions, with a bearish outlook if it exits an ascending wedge pattern.
The ASX 200 surged to a seven-week high of 8481.6, up 0.89%, following a softer-than-expected Q4 consumer price index, raising expectations for an interest rate cut by the RBA in February. Inflation is nearing the RBA's target range, with a 75% chance of a 25 basis point cut anticipated.Local tech and property stocks saw significant gains, driven by optimism around potential rate cuts, while the banking sector also experienced upward movement. The ASX 200 remains in a bullish trend, with support at approximately 8050 and a potential retest of its record high of 8514.
Savings interest rates are declining once again, with the Appenzeller Kantonalbank reducing its rate to 0.2 percent. This trend follows a brief increase and aligns with the recent adjustments in the Swiss National Bank's key interest rates, affecting banks across Eastern Switzerland.
The European Central Bank is expected to announce a 25 basis point cut in key interest rates, marking its fifth consecutive reduction to stimulate the eurozone economy amid low inflation and growth concerns. With Germany facing consecutive GDP contractions, ECB President Christine Lagarde emphasizes a data-driven approach to future monetary policy adjustments. Market reactions may include increased stock prices and bond attractiveness, while traders should prepare for potential volatility around the announcement.
AUD/USD ended last week at 0.6314, marking a 2% gain, but faced pressure from weak Chinese PMI data and concerns over a new AI model from China. The focus now shifts to Australia's Q4 CPI release, with expectations of a 0.2% rise in headline inflation, potentially prompting the RBA to cut interest rates in February.
The European Central Bank is expected to cut rates by 25 basis points to 2.75% during its upcoming meeting on January 30, with a forecast of further reductions at each of the four Governing Council meetings in the first half of 2025. The policy rate is projected to reach 2% by mid-year, followed by additional cuts in the second half, ultimately hitting a terminal rate of 1.5% by year-end.
Deutsche Bank warns that several risks could disrupt the recent stock rally, including the lagged effects of past rate hikes, higher inflation, and geopolitical tensions. While markets have shown resilience, concerns over AI-driven volatility and potential economic data surprises could trigger selloffs. Despite these threats, the bank notes that risk assets remain fundamentally strong.
Bill Gates supports efforts to reduce U.S. government debt, currently over $36.2 trillion, emphasizing the need for a zero-based budgeting approach that examines all expenditures, including pensions, defense, and healthcare. He acknowledges potential efficiency gains but warns against cutting essential programs that save lives, particularly in healthcare. Meanwhile, concerns grow over the debt-to-GDP ratio, projected to reach 166% by 2054, which could alarm lenders about America's repayment capacity.
A sharp rise in the VIX has led to significant declines in the tech sector, with Nasdaq100 futures down 3% amid concerns over competition from China's DeepSeek, whose AI model rivals OpenAI's at lower costs. Market anxiety is compounded by uncertainty surrounding upcoming PCE inflation figures and escalating tensions between the U.S. and Colombia, following Trump's threats of sanctions. Investors are wary of potential repercussions for other nations opposing U.S. policies.
The Federal Reserve has shifted to a cautious monetary policy stance after cutting rates by 100 basis points in 2024, signaling limited easing in 2025 amid strong economic performance and persistent inflation. Markets are now pricing in only 50 basis points of cuts for the year, with diminished expectations for immediate rate reductions.The US dollar has strengthened significantly, reaching levels not seen since 1985, impacting forex trading dynamics. Traders are advised to adapt strategies to navigate increased market volatility and potential policy shifts, particularly as rate cuts may be more likely in the latter half of 2025.
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