The announcement of monetary policies from The Fed, Bank of Japan (BoJ), and Bank of England (BoE) has triggered significant volatility in the financial markets, which is expected to persist in trading on Friday (December 20, 2024). This high volatility is likely to continue due to several economic data releases from the US and the inflation data based on Personal Consumption Expenditure (PCE) that might heavily influence market movements.
GOLD
Gold (XAUUSD) closed Thursday’s trading at $2,594.02 per troy ounce, gaining $8.48. Previously, it had peaked at $2,626.34 per troy ounce before a decline followed the release of US economic data. The upward revision of US economic growth for Q3 2024, lower-than-forecast jobless claims, and significantly higher second-hand home sales have strengthened The Fed’s outlook to avoid aggressive rate cuts next year, creating negative sentiment for Gold.
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This negative sentiment is expected to linger through the European session. Moreover, if European data is released worse than forecast, the US dollar could strengthen further, putting additional pressure on Gold.
OIL
Oil prices have seen a decline for four consecutive days, closing Thursday at $69.21 per barrel. Central banks in several countries are taking a more cautious approach toward interest rate cuts in the coming year. This has lowered global economic prospects, leading to negative sentiment for Oil, as demand is not anticipated to be high. This negative sentiment is likely to dominate Oil trading in the European session.
EURUSD
The EURUSD pair initially rose sharply during Thursday’s trading but later dropped, approaching its lowest level in nearly two years. This movement indicates continued weakness in the EURUSD, as the European Central Bank (ECB) may be more aggressive in cutting rates compared to The Fed next year.
Today, during the European session, Germany’s Producer Price Index (PPI) will be published at 14:00 WIB. Trading Central forecasts a PPI of -0.3% year-on-year (YoY) for November, an improvement from the previous month’s -1.1% YoY.
Even though the PPI is better than before, being negative will still exert pressure on the EURUSD.
GBPUSD
GBPUSD experienced significant volatility in Thursday’s trading, closing at 1.24986. Compared to the previous day’s close, GBPUSD dropped by 732 points (73.2 pips). This decline occurred despite the BoE maintaining its benchmark interest rate at 4.75%.
The pressure on GBPUSD arose after three out of nine monetary policy voting members opted to lower interest rates and revised down economic growth projections. This could indicate that the BoE might be more aggressive in rate cuts compared to The Fed next year.
UK retail sales data at 14:00 WIB could add pressure to GBPUSD if it comes in below the Trading Central forecast of 1.9% YoY for November, which is lower than the previous month’s growth of 2.4% YoY.
USDJPY
The USDJPY currency pair surged over 250 pips to 157.411 during Thursday’s trading, reaching its highest level in five months. The monetary policy announcements from The Fed and BoJ were significant catalysts for the USDJPY movement.
The strength of the US dollar responded to The Fed’s policy, while the yen was pressured after the BoJ opted to maintain interest rates, without indicating when rates might rise, thus exerting pressure on the yen.
These two policies are expected to favor the USDJPY in the European session.
Nasdaq
Selling pressure following The Fed’s monetary policy announcement continues to affect the Nasdaq. Yesterday, the Nasdaq index recorded a drop of 52 points and continued to decline by 204 points, reaching 21,203 this afternoon.
Economic data indicating a robust US economy reinforces the expectation that The Fed will refrain from aggressive rate cuts next year, keeping the Nasdaq under pressure.
