Week of december 23

A flurry of central bank decisions and forecasts caused concern in the markets as the Fed cut interest rates but signalled fewer future cuts than expected, and the BOJ and BOE held rates steady but adopted a dovish tone.

The coming week features lighter trading volumes due to holidays, with the RBA meeting minutes and US durable goods orders being the key releases.​

Week in Review

A series of key central bank decisions marked the final full trading week of 2024, setting a cautious tone across markets.

The Fed delivered its anticipated 25 bps rate cut, but the hawkish undertones in its projections weighed on risk sentiment. The updated dot plot indicated just two rate cuts for 2025, falling short of market expectations for three, while Fed Chair Powell voiced concerns about tariff-linked inflation pressures. EURUSD came under pressure following the event but managed to bounce back near the $1.0400 handle by the end of the week.

The BOE kept rates unchanged in what analysts dubbed a dovish hold, with six members backing the status quo against three advocating a cut (up from just one expected). The central bank also trimmed its Q4 growth outlook, stressing its data-dependent approach. Meanwhile, UK economic indicators painted a hawkish picture ahead of the meeting, as wages jumped to 5.2% year-on-year from 4.4% prior, and core inflation exceeded forecasts at 3.5%. Cable dropped to a May low below $1.2500, with the initial reaction offering a rejection.

The BOJ kept rates unchanged, with Governor Kazuo Ueda emphasising the need for more wage data before considering rate adjustments, raising speculation of a March hike instead of January. A lone dissenter backed an immediate hike. USDJPY still rose to 158.00, exposing 159.00 and the 160.00 resistance next.

Canada inflation eased unexpectedly to 1.9% from 2%, while US retail sales rose to 0.7%, beating the expected 0.5%. The loonie spiked to a March 2020 high, with the next resistance eyed at 1.4600. Chinese industrial output accelerated to 5.4% year-on-year against the 5% expected, as Beijing announced plans to widen its budget deficit to boost growth.

Geo-politics weighed on market sentiment. US lawmakers raced to prevent a government shutdown while President Trump demanded increased EU fossil fuel imports under threat of tariffs. Meanwhile, Canadian Finance Minister Chrystia Freeland resigned over budget disagreements, intensifying pressure on PM Trudeau to resign. Chancellor Olaf Scholz lost a no-confidence vote in Europe, triggering German elections for late February.

Biggest Market Movers

• The yen posted a 2.1% weekly decline after markets pushed forward expectations for a hike, but the decline took a breather near the end of the week following verbal intervention by Japanese officials.
• The dollar climbed 1.8% through the week, bolstered by the Fed's hawkish hold and reduced risk appetite supporting Treasury yields.
• Crude oil slid 3.2%, pressured by mounting demand concerns amidst global growth worries.
• The Dow Jones marked its longest losing streak in over five decades, ending an 11-day downward run with a modest uptick Thursday.

Top Events in the Week Ahead

Holiday-thinned trading characterises the coming days, with most markets closed from midday Tuesday through Thursday.

Durable Goods in Focus

US durable goods orders, released Tuesday after markets close for the holidays, are projected to show core orders accelerating to 0.2% from 0.1%. Additionally, the Conference Board will publish its consumer confidence survey, which is anticipated to remain steady for December. Gold could react to the events, with the next levels at $2715 and $2535 per ounce, respectively.

RBA Minutes on the Docket

The RBA will release the minutes from its last meeting, during which rates were held steady. Investors are likely to seek further details on why the statement omitted the phrase "not ruling anything in or out." The Aussie’s plunge to an October 2022 low at 0.6200 will expose 0.6175 next, with 0.6100 in sight should bearish momentum persist.

Other Events, Earnings

Canadian monthly GDP headlines Monday trading. The BOJ meeting minutes from two months prior surface Tuesday. US weekly jobless claims emerge Thursday, while Japanese labour data rounds out the week Friday.

The corporate calendar remains quiet, and no major earnings releases are scheduled.