The announcements regarding monetary policies from the Federal Reserve, Bank of Japan (BoJ), and Bank of England (BoE) have triggered significant volatility in the financial markets, which continued during trading on Thursday. This high volatility may persist into trading on Friday (December 20, 2024).
Several economic data sets from the US were released alongside European data, including the inflation figures based on the Personal Consumption Expenditures (PCE) in the United States, which could greatly impact market movements.
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GOLD
Gold prices (XAUUSD) closed Thursday’s trading at $2,594.02 per troy ounce, up $8.48. Earlier, Gold had reached a peak of $2,626.34 per troy ounce before retreating following the release of US data.
Economic growth in the US for the third quarter of 2024 was revised upwards, unemployment claims were lower than the forecast, and existing home sales exceeded expectations. This data reinforces the Fed’s projection to refrain from aggressively cutting interest rates next year, which creates a negative sentiment for Gold.
This negative sentiment is likely to impact trading in the European session as well. If data from Europe is released worse than expected, there is potential for the US dollar to strengthen further, adding more pressure on Gold.
OIL
Oil prices have recorded a decline for four consecutive days, closing Thursday at $69.21 per barrel. Central banks in several countries are exercising caution regarding interest rate cuts next year.
This has lowered global economic prospects and generated negative sentiment towards Oil due to the potential for weaker demand. This negative sentiment is expected to color Oil’s movements in the European session.
EURUSD
EURUSD experienced a sharp rise during trading on Thursday before retracing, coming close to its lowest level in nearly two years. This movement indicates weakness in EURUSD as the European Central Bank (ECB) is likely to be more aggressive in cutting interest rates compared to the Fed next year.
In today’s European session, producer price inflation (Producer Price Index/PPI) data from Germany will be released at 2:00 PM WIB. The forecast from Trading Central shows a November PPI of -0.3% year-on-year (YoY), compared to the previous month’s -1.1% YoY.
While this PPI may be an improvement, the continued negative figures will still exert pressure on EURUSD.
GBPUSD
GBPUSD had very volatile movements during Thursday’s trading, closing at 1.24986. Compared to the close on Wednesday, GBPUSD dropped by 732 points (73.2 pips). The currency pair declined despite the BoE maintaining its benchmark interest rate at 4.75%.
The pressure on GBPUSD arose after 3 out of 9 policy voting members opted to lower interest rates and reduce economic growth forecasts. This could indicate that the BoE may be more aggressive in cutting interest rates compared to the Fed next year.
UK retail sales data to be released at 2:00 PM WIB could further pressurize GBPUSD if it comes below the forecast of 1.9% YoY for November, which is lower than the previous month’s growth of 2.4% YoY.
USDJPY
This 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 Bank of Japan (BoJ) triggered this significant movement in USDJPY.
The US dollar strengthened in response to the Fed’s policies, while the yen was pressured after the BoJ decided to keep its interest rates stable without giving signals on when rates might be increased, adding further pressure on the yen.
Both policies are expected to continue influencing positive sentiment towards USDJPY in the European session.
Nasdaq
The selling pressure following the Fed’s monetary policy announcement continues to loom over the Nasdaq. Yesterday, the Nasdaq index fell by 52 points and continued to drop by another 204 points to 21,203 by this afternoon.
Economic data indicating strong US economic performance reinforces expectations that the Fed will not aggressively cut rates next year, further weighing on the Nasdaq.
