China has started the week with underwhelming data, as November retail sales grew by just 3.0% year-on-year, missing the expected 4.6% growth. House prices continued their decline, while industrial output remained stable. Officials have been considering stimulus options, such as lowering bank reserve requirements; however, credit data suggests lower borrowing costs aren’t effective amid a lack of investment interest. Consequently, Chinese bond yields hit another record low, prompting the central bank to consult with commercial banks on their positions. The yuan is also facing pressure, as 10-year yields underwent their largest weekly drop since 2018, coinciding with a notable rise in longer-dated Treasury yields this year. There are discussions about Beijing potentially letting the yuan depreciate to bolster the economy, but this has drawn criticism from President-elect Donald Trump’s trade advisor, Peter Navarro. In South Korea, political stability has improved with Han Duck-soo temporarily replacing the impeached President Yoon Suk Yeol. Meanwhile, the Constitutional Court has started reviewing the impeachment case, with up to six months to decide whether to remove or reinstate Yoon. This pledge of stability has kept the KOSPI steady.Attention is now focused on the Federal Reserve meeting on Wednesday. Considering market expectations, with 24 basis points already factored in, it may be wise to approach the December FOMC with some caution. Since the November meeting, demand data from the US has been consistently strong, and there has been a notable increase in firms’ expectations following the election. This bodes well for both hiring and investment. On the other hand, inflation data has been somewhat disappointing, indicating that the disinflation trend observed earlier in the year has stalled. While there may be some seasonal adjustment issues contributing to this, the trend is evident across consumer, producer, and the Fed’s preferred PCE price measures. There is insufficient evidence to suggest a decline in the price outlook, and mid-term forecasts should still allow the Fed to consider rate cuts this month. Powell still perceives policy as restrictive, but this should be coupled with a clear inclination towards a more gradual approach moving forward. Therefore, we anticipate a hawkish cut to conclude the year, along with stronger growth forecasts and an upward adjustment of the neutral rate in the Summary of Economic Projections. This should help moderate expectations for further easing throughout next year, which appear overly optimistic or unnecessary based on the current macroeconomic data.
Overnight Newswire Updates of Note
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
CFTC Data As Of 13/12/24
Technical & Trade ViewsSP500 Bullish Above Bearish Below 6000
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EURUSD Bullish Above Bearish Below 1.0450
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GBPUSD Bullish Above Bearish Below 1.26
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USDJPY Bullish Above Bearish Below 154
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XAUUSD Bullish Above Bearish Below 2600
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BTCUSD Bullish Above Bearish Below 92000
Primary objective is 100,000 TARGET HIT NEW PATTERN EMERGING(Click on image to enlarge)
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