The announcements from the Federal Reserve, Bank of Japan (BoJ), and Bank of England (BoE) have led to significant volatility in the financial markets, continuing through Thursday’s trading. This heightened volatility is likely to persist into Friday’s trading session (December 20, 2024).
Several economic data points from the United States have been released alongside inflation figures based on Personal Consumption Expenditures (PCE) that could profoundly impact market movements.
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GOLD
Gold prices (XAUUSD) ended Thursday’s session at $2,594.02 per troy ounce, marking an increase of $8.48. Previously, gold had reached $2,626.34 per troy ounce before retreating following data releases from the United States.
Revised upward growth figures for the U.S. economy in the third quarter of 2024, along with lower-than-expected unemployment claims and much higher existing home sales, bolstered the Fed’s projection not to aggressively lower interest rates next year, negatively impacting gold sentiments.
This negative sentiment is expected to carry over into the European trading session. Particularly if the European data released proves worse than forecast, the US dollar could strengthen further and exert additional pressure on gold prices.
OIL
Oil prices have dropped for four consecutive days, closing at $69.21 per barrel on Thursday. Central banks in various countries are opting for caution regarding interest rate cuts for the upcoming year.
This cautioning trend diminishes global economic outlooks, negatively impacting oil prices as demand may not remain robust. Anticipated negative sentiments are expected to continue influencing oil prices during European trading.
EURUSD
The EURUSD pair saw a sharp rise during Thursday’s trading before retreating close to its lowest level in nearly two years. This behavior indicates continued weakness in EURUSD as the European Central Bank (ECB) is likely to be more aggressive than the Fed in cutting rates next year.
Today, during the European session, Germany’s Producer Price Index (PPI) will be released at 14:00 WIB. The forecast from Trading Central predicts a PPI change of -0.3% year-on-year (YoY) for November, compared to the previous month’s -1.1% YoY.
Even if this PPI is an improvement, lingering negative numbers will still put pressure on EURUSD.
GBPUSD
GBPUSD exhibited high volatility on Thursday, closing at 1.24986. Compared to Wednesday’s close, GBPUSD dropped by 732 points (73.2 pips). This decline occurred despite the BoE maintaining its interest rate at 4.75%.
Pressure on GBPUSD arose after three out of nine monetary policy voting members favored lower interest rates and revised growth projections downwards, indicating the BoE may adopt a more aggressive rate-cutting stance than the Fed in the coming year.
UK retail sales data released at 14:00 WIB could further pressure GBPUSD if it comes in lower than the forecast of 1.9% YoY in November, which itself is a reduction from the previous month’s growth of 2.4% YoY.
USDJPY
The USDJPY pair surged over 250 pips to 157.411 during Thursday’s trading, reaching a five-month high. The monetary policy announcements from the Fed and BoJ were primary drivers behind this significant movement.
The robust performance of the US dollar responded well to the Fed’s policy, while the yen weakened in response to the BoJ’s decision to maintain interest rates, with no clear signals on when rate increases might occur, continuing to pressure the yen.
Both policy stances are expected to maintain a positive sentiment towards USDJPY during European trading.
Nasdaq
After the Fed’s monetary policy announcement, selling pressure continues to weigh on Nasdaq. Yesterday, Nasdaq recorded a decline of 52 index points, followed by a further drop of 204 index points to 21,203 by midday today.
Economic data indicating the strength of the US economy reinforces expectations that the Fed will not aggressively cut interest rates next year, leading to continuous pressure on Nasdaq.
