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Skerdian Meta•Friday, December 13, 2024•3 min read
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Today the UK GDP report is the main event of the day, which will close the week, ahead of the FOMC interest rate decision next week.
The Swiss National Bank’s unexpected 50 basis point rate cut underscored the divergence in monetary policy between the SNB and the Federal Reserve, propelling the USD/CHF above 0.89. Contributing to the movement, Donald Trump hinted at additional business tax cuts during his remarks while ringing the opening bell at the NYSE, which may have added upward pressure on US Treasury yields.
The dollar also found support from a combination of a weak 30-year bond auction and stronger-than-expected PPI producer inflation figures. In previous market dynamics, PPI’s strength overshadowed higher-than-expected jobless claims, which were 20,000 above projections. Meanwhile, the EUR/USD saw relatively subdued action, trading within a narrow 50-pip range around 1.05 without any significant catalysts.
The European Central Bank’s decision to cut rates by 25 basis points aligned with expectations, as did their “meeting-by-meeting” guidance. Market reactions were muted, as this move had already been anticipated following leaks suggesting similar reductions at the next two ECB meetings. While forecasts for GDP and inflation were revised slightly lower, they remain above market consensus. Ultimately, the euro ended the day at the lower end of its range, reflecting a market environment still dominated by the strength of the US dollar.
Today’s Market Expectations
UK GDP Outlook
October’s GDP is expected to grow by +0.2% month-over-month, a recovery from September’s 0.1% decline. The prior negative GDP figure contributed to a weak Q3 result of just +0.1% growth. ING attributes the earlier slowdown to “volatility within industry, particularly manufacturing.”
This time, Investec analysts predict:
- Construction: Expected growth.
- Manufacturing: Likely flat.
- ICT industries: Anticipated recovery.
- Services sector: Limited growth.
Investec forecasts a +0.2% M/M rise for October GDP and projects a +0.4% Q/Q increase for Q4, maintaining this growth pace through 2025.
Policy Implications
Despite these forecasts, the Bank of England (BoE) remains focused on services inflation and real wage growth, which are critical to its policy decisions. The volatility of monthly GDP figures limits their immediate influence on monetary policy expectations.
Currently, markets price in:
- 72bps of rate cuts by the end of 2025.
- Minimal impact on the December meeting, with just 2bps of loosening expected.
Yesterday the USD dollar continued the slight bullish momentum after the PPI inflation report however the jump in the Unemployment Claims stopped the buyers somewhat. Most forex pairs traded in a range, so the volatility wasn’t exceptional and we had four closed trading signals, ending the day with three winning fore signals and a losing trade.
Gold Rejected at November 25 Highs
Gold has experienced a strong rally this week, climbing approximately $100 from its recent lows. Boosted by the US CPI inflation report, the metal has reclaimed the $2,700 level and formed three consecutive daily bullish candlesticks. Currently, gold is testing resistance at $2,721, a level last seen on November 25. At $2,718.50, it marks its highest point since November 21, with a $40 increase on the day.
XAU/USD – Daily Chart
USD/JPY Bounces Off the 20 SMA
In currency markets, USD/JPY saw a significant reversal after a robust two-month rally that added over 17 cents. Late November brought a shift in market sentiment, leading to a sharp selloff. The pair dropped 7 cents, falling below the key 149 level. However, signs of stabilization emerged last week as USD/JPY consolidated around the 150 level, forming a doji candlestick on the weekly chart that hinted at a potential recovery. This week, the pair regained its bullish momentum, rising 3 cents after finding support at the 20 SMA on the weekly chart.
USD/JPY – Weekly Chart
Cryptocurrency Update
Bitcoin Stays Close to $100K
The cryptocurrency market has also made headlines, with Bitcoin reaching a historic milestone by closing above $100,000 for the first time in November, ending the month at $102,000. Analysts predict further gains, with targets of $120,000 or more, provided prices remain above the critical $100,000 level. Despite intermittent dips below $95,000, strong buyer interest has sustained bullish momentum, sending the price above $100K again and again, however they’re not able to resume the bullish trend, so we’re seeing consolidation around the 100K level.
BTC/USD – Daily chart
Ethereum Shying Out at $4,000 Again
Ethereum has mirrored this strength, rebounding from a drop below $3,000 to trade near $4,000. Currently, it remains securely above its 50-day SMA and the $3,500 mark. Ethereum lead the broader cryptocurrency rally last, driven by optimistic forecasts and growing investor confidence in digital assets, however it failed to reach $4,000 yesterday and retreated lower.
ETH/USD – Daily chart
Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
www.fxleaders.com