9 more sleeps until Christmas Day and 3 more major market events: namely, the Fed on Wednesday, and the BoJ and BoE on Thursday. Overnight, Asian shares have fallen. Although China’s retail sales increased 3% from a year ago, they fell short of forecasts of 5%.
Onto the main events this week. The Fed is widely expected to deliver another 25-basis-point rate cut after its final meeting of the year on Wednesday, in what would be its third straight reduction. With the cut already fully priced in, investors are focusing on any guidance around how much further rates could be cut in 2025. The BoJ is also on Thursday, and while market expectations have swung widely in the past two weeks, a consensus is forming that officials will hold steady. Finally, the Bank of England is widely expected to keep rates on hold at 4.75% on Thursday and is seen holding off from delivering a third 25-bps rate cut until February. Remember, the GDP figure on Friday was disappointing, and retail sales are flatlining. The market is currently pricing in three quarter-point rate cuts by the end of next year. We still don’t see any reason, apart from the carry, to be long on GBP, especially as last month the central bank trimmed its annual growth forecast for 2024 to 1% from 1.25%. Chancellor Rachel Reeves has increased taxes, taken away the winter fuel allowance, and added little cheer.
Market-wise, Bitcoin rose 2.2% to $105,062.17, Ether rose 2.6% to $3,954.22, the yield on 10-year Treasuries declined two basis points to 4.38%, West Texas Intermediate crude fell 0.6% to $70.88 a barrel, and spot gold rose 0.2% to $2,653.60 an ounce.
As for today:
- 8:30 am – German PMI
- 9:30 am – UK PMI
- 1:30 pm – Empire State Manufacturing Index
- 2:45 pm – US PMI
