Japanese Yen Loses Ground on Shifting Interest Rate Expectations

The Japanese Yen has lost 2.3% against the US dollar since the end of last week, roughly twice as much as the rise in the dollar index against a basket of six developed market currencies. This change is due to a shift in interest rate expectations, with investors increasingly doubting an imminent rate hike in Japan and seeing fewer rate cuts from the Fed next year.

Interestingly, the latest inflation data does not help the Yen. November data showed an acceleration in Japanese business input prices to 3.7% y/y, the highest since the middle of last year. Corporate services price growth (October data) jumped 0.8% m/m to an annualised pace of 2.9%, maintaining levels near 3% y/y since April. These indices are important leading indicators of inflation, pointing to increasing pressure on retail prices and supporting a policy rate hike by the Bank of Japan.

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🗓 Economic Calendar at 2024/12/12 (GMT)

00:30 🇦🇺 ⚡️ Unemployment Rate — Exp: 4.2% Actual: 3.9%

00:30 🇦🇺 ⚡️ Employment Change — Exp: 26.0K Actual: 35.6K

00:30 🇦🇺 Part-Time Employment Change Actual: 52.6K | -17.0K

08:30 🇨🇭 ⚡️ SNB Policy Rate — Exp: 0.75% Actual: 0.50%

08:30 🇨🇭 ⚡️ SNB Monetary Policy Assessment

09:00 🇨🇭 ⚡️ SNB Press Conference

13:15 🇪🇺 ⚡️ ECB Interest Rate Decision — Exp: 3.15% Actual: 3.15%

13:15 🇪🇺 Deposit Facility Rate — Exp: 3.00% Actual: 3.00%

13:15 🇪🇺 Marginal lending facility — Exp: 3.40% Actual: 3.40%

13:15 🇪🇺 ⚡️ Monetary Policy Statement

13:30 🇺🇸 ⚡️ Unemployment Claims — Exp: 221K Actual: 242K

13:30 🇺🇸 Continuing Claims — Exp: 1880K Actual: 1886K

13:30 🇺🇸 Producer Price Index — Exp: 0.2% | 2.6% Actual: 0.4% | 3.0%

13:30 🇺🇸 Core PPI — Exp: 0.2% | 3.2% Actual: 0.2% | 3.4%

13:45 🇪🇺 ⚡️ ECB Press Conference

21:30 🇳🇿 Business NZ Manufacturing Index — Exp: 46.2

23:50 🇯🇵 Tankan Manufacturing Index — Exp: 13

23:50 🇯🇵 Tankan Non-Manufacturing Index — Exp: 33

23:50 🇯🇵 Tankan Large Manufacturers Outlook — Exp: 11

23:50 🇯🇵 Tankan Non-Manufacturing Outlook — Exp: 27

23:50 🇯🇵 Tankan Large All Industry Capex — Exp: 9.6%


[Updated in real time]

Bitcoin and Ethereum on the verge of breaking resistance

Crypto market capitalisation jumped 5% in 24 hours to $3.64 trillion. Optimism in the US stock market pushed Bitcoin above $100K, bringing buyers back into altcoins. The Cryptocurrency Sentiment Index returned to extreme greed territory at 83.

Bitcoin climbed just above $101.5K, meeting solid resistance for the past seven days. Current levels are above the psychologically important round level and the consolidation area of the last three weeks. It may be risky to talk about a breakout to new highs and a complete eradication of bearish sentiment. A confirmation of buying strength could see a quick rally into the $120,000 area.

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GBPAUD Wave Analysis 12 December 2024

- GBPAUD reversed from resistance zone

- Likely to fall to support level 1.9800

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GBPUSD Wave Analysis 12 December 2024

- GBPUSD reversed from resistance level 1.2780

- Likely to fall to support level 1.2635

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🗓 Economic Calendar at 2024/12/13 (GMT)

07:00 🇬🇧 ⚡️ Gross Domestic Product — Exp: 0.1% | 0.2% Actual: -0.1% | 0.1%

07:00 🇬🇧 Industrial Production — Exp: 0.3% | 0.2% Actual: -0.6% | -0.7%

07:00 🇬🇧 Manufacturing Production — Exp: 0.2% | 0.9% Actual: -0.6% | 0.0%

07:00 🇬🇧 Goods Trade Balance — Exp: -16.1B Actual: -19.0B

11:00 🇨🇳 New Yuan Loans — Exp: 950B Actual: 580B

12:00 All G7 Meetings


[Updated in real time]

SNB’s Bold Rate Cut Amid Historically Strong CHF

The Swiss National Bank cut its key interest rate by 50 points to 0.5%, a bigger move than markets had expected. The SNB has now cut the rate by 125 points in four meetings since March. That's not a record in the G10, where the Bank of Canada has cut by 175 points, and the ECB is expected to cut by 135 points. In Switzerland, however, subdued inflation brought rates back close to zero.

The consumer price index slowed to 0.6% y/y, the lowest since 2021. Prices have been either flat or falling for the past six months. The Producer and Import Price Index has been falling for a year and a half, with the latest reading at -1.8% y/y.

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The dollar is set for a new growth momentum

The US dollar methodically gained ground over the week. The DXY rose for six consecutive sessions, gaining 1.3% on the back of macroeconomic data. Neutral inflation readings provided the latest leg of gains. Consumer prices rose in line with average forecasts, up 2.7% headline and 3.3% excluding food and energy. Markets reasoned that this would not prevent a Fed rate cut next week.

At the same time, expectations of aggressive rate cuts are fading in the outlook for next year, which is what drives markets most. In addition to a strong labour market, producer prices also have an impact. The PPI growth rate has risen to 3%, the highest since February 2023. Core inflation, at 3.4% y/y, is accelerating through 2024.

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U.S. indices divergence

The dollar's rise in the latest week weighed on the Dow Jones and Russell 2000 indices, which fell 2.8% and 4.8%, respectively, from their recent highs. However, the Nasdaq100 was boosted by the success of the high-tech giants. This index approached 21800, moving further into all-time high territory.

This kind of divergence is not sustainable. This means that in the next week or two, we will either see an acceleration in the Russell and Dow or a correction in the S&P500 and Nasdaq100. A rising dollar argues for the second scenario, but the Fed's comments could dramatically change sentiment.

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What is next: The Final Storm Before Calm

The new week may serve as the market's final crescendo before a gentle lull sets in for the remainder of the year. Meanwhile, the significance of the latest batch of macroeconomic data cannot be overstated.

Monday's preliminary PMI business activity estimates for Europe offer the last chance for the region to end the year on a positive note. November's data was a disappointment, sending EURUSD below 1.05 at one point and showing an acceleration in the decline of business activity in the Eurozone. The ECB is taking a cautious approach to rate cuts, but the weak data has seen the Euro fall against the Dollar as traders are pricing in 4 ECB rate cuts over the next six months versus 2-3 for the Fed.

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#Shorts
#Gold: a growing correction

USDJPY Wave Analysis 13 December 2024

- USDJPY reversed from support zone

- Likely to rise to resistance level 156.35

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EURGBP Wave Analysis 13 December 2024

- EURGBP reversed from support zone

- Likely to rise to resistance level 0.8350

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🗓 Economic Calendar at 2024/12/16 (GMT)

02:00 🇨🇳 Fixed Asset Investment — Exp: 3.5% Actual: 3.3%

02:00 🇨🇳 Industrial Production — Exp: 5.4% | 5.7% Actual: 5.4% | 5.8%

02:00 🇨🇳 NBS Press Conference

07:00 🇪🇺 ⚡️ ECB President Christine Lagarde Speaks

08:15 🇪🇺 ⚡️ ECB President Christine Lagarde Speaks

08:15 🇫🇷 Manufacturing PMI — Exp: 43.2 Actual: 41.9

08:15 🇫🇷 Services PMI — Exp: 46.9 Actual: 48.2

08:15 🇫🇷 PMI Composite — Exp: 47.0 Actual: 46.7

08:30 🇩🇪 Manufacturing PMI — Exp: 43.1 Actual: 42.5

08:30 🇩🇪 Services PMI — Exp: 49.5 Actual: 51.0

08:30 🇩🇪 PMI Composite — Exp: 48.0 Actual: 47.8

09:00 🇪🇺 Manufacturing PMI — Exp: 45.3 Actual: 45.2

09:00 🇪🇺 Services PMI — Exp: 49.5 Actual: 51.4

09:00 🇪🇺 PMI Composite — Exp: 48.2 Actual: 49.5

09:30 🇬🇧 Manufacturing PMI — Exp: 48.4 Actual: 47.3

09:30 🇬🇧 Services PMI — Exp: 50.9 Actual: 51.4

09:30 🇬🇧 PMI Composite — Exp: 50.0 Actual: 50.5

13:30 🇺🇸 Empire State Manufacturing Index — Exp: 6.4 Actual: 0.2

14:45 🇺🇸 Manufacturing PMI — Exp: 49.4 Actual: 48.3

14:45 🇺🇸 Services PMI — Exp: 55.7 Actual: 58.5

14:45 🇺🇸 PMI Composite — Exp: 54.4 Actual: 56.6

20:35 🇨🇦 ⚡️ BOC Governor Tiff Macklem Speaks


[Updated in real time]

Bitcoin has overcome selling resistance

The cryptocurrency market hit record highs in terms of capitalisation, reaching $3.73 trillion at the start of active Asian trading and is sitting at $3.71 trillion at the time of writing. The market digested the overhang of pending selling in Bitcoin near psychologically important levels and continued to move higher.

Bitcoin gained about 3% over the past day, slightly outperforming the broader market. The move into all-time high territory, including this morning's push above $106K, confirms the bullish bias. This is especially important after a three-week consolidation near the $100K level. An acceleration in growth is now likely if unexpected news from the traditional financial markets doesn't stop this rally.

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Oil: the final test of the year

The price of a barrel of WTI crude oil fell by 0.7% and was in danger of falling below $70. OPEC+ helped overcome this level at the end of last week. As predicted by observers, the cartel postponed the 'voluntary' increase in production by key members for another quarter.

OPEC+'s actions look like an attempt to prevent the price from spiralling downwards. Mere signals of a breakdown in cartel unity may be enough for prices to collapse. This creates a trap for large producers that are bound by production commitments, as they lose their market share, most worryingly to the US.

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#Shorts

#DXY: Growth into 2025

🗓 Economic Calendar at 2024/12/17 (GMT)

07:00 🇬🇧 Claimant Count Change — Exp: 28.2K Actual: 0.3K

07:00 🇬🇧 Unemployment Rate — Exp: 4.3% Actual: 4.3%

07:00 🇬🇧 Average Earnings Index — Exp: 4.6% | 5.0% Actual: 5.2% | 5.2%

09:00 🇩🇪 Ifo Business Climate — Exp: 85.5 Actual: 84.7

09:00 🇩🇪 IFO - Current Assessment — Exp: 84.0 Actual: 85.1

09:00 🇩🇪 IFO - Expectations — Exp: 87.5 Actual: 84.4

10:00 🇩🇪 ZEW Economic Sentiment — Exp: 6.8 Actual: 15.7

10:00 🇩🇪 ZEW Survey (Current Situation) — Exp: -92.6 Actual: -93.1

10:00 🇪🇺 ZEW Economic Sentiment — Exp: 12.2 Actual: 17.0

13:30 🇨🇦 ⚡️ Consumer Price Index — Exp: 0.1% | 2.0% Actual: 0.0% | 1.9%

13:30 🇨🇦 Core CPI — Exp: 0.4% | 1.7% Actual: -0.1% | 1.6%

13:30 🇨🇦 Common Core CPI — Exp: 2.1% Actual: 2.0%

13:30 🇨🇦 Median Core CPI — Exp: 2.4% Actual: 2.6%

13:30 🇨🇦 Trimmed Core CPI — Exp: 2.6% Actual: 2.7%

13:30 🇺🇸 ⚡️ Retail Sales — Exp: 0.6% | 0.4% Actual: 0.7% | 0.2%

14:15 🇺🇸 Industrial Production — Exp: 0.3% Actual: -0.1%


[Updated in real time]