The USD is steady, oil prices firm, equity markets are mixed, and US yields rise with the Fed in focus. The USD index holds steady ahead of the Fed's interest rate decision today, while JPY & GBP are also sidelined ahead of their respective interest rate decisions on Thursday. US futures are steady after the DOW posted its 9th-day losing streak, and European shares edged higher in cautious trading. In Japan, shares of Nissan Motor Co. rallied the most since at least 1974 on news that the carmaker is exploring a possible merger with Honda Motor Company. The Fed is widely expected to cut interest rates by another 25 bps; investors will be focused on the Fed's policy outlook for 2025 as inflation levels remain stubborn. Elsewhere, oil prices are little changed ahead of the Fed rate decision, Bitcoin falls 2% to $104k, while silver & gold prices hold steady. Alongside the US Interest Rate Decision & the FOMC Press Conference, investors will also be focused on the SNB Quarterly Bulletin, US Housing Starts, and US Building permits to help provide intraday direction to the currency markets.
In other news. The US weighs a ban on Chinese router manufacturer TP-Lin in millions of American homes. Congress releases short-term funding bill as deadline nears to avert a holiday shutdown. The gloves are off in a fiery start to the German election campaign. The Brazilian currency rout is worsening unless Lula delivers fiscal reforms. Iran's revolutionary guard extends control over Tehran's oil exports. According to sources, Honda & Nissan move to deepen ties, including a possible merger. Chinese property developers look to bite the bullet and revamp onshore debt in 2025. Canadian government announces new border security plan amid trump tariff threats.
In currency markets. ECB policymaker Wunsch says a weaker euro may take the edge off US tariffs. CNY slips, but its losses are slowed by state bank support. GBP eases ahead of the Fed rate decision after the UK inflation report. Brazil's central bank holds spot dollar auctions for the third straight session. CNY is flat, while Asian currencies ease by 0.1% on average against the USD. Trading currencies come under pressure, with AUD & NZD weakening 0.4%, NOK falling 0.25%, JPY & CHF down 0.1% and SEK, MXN & ZAR up 0.15% against the USD.
In commodity markets. Oil & Natural Gas prices strengthened by 0.5%. Gold is up by 0.1%. Silver prices slipped by 0.1%. Copper & Wheat prices firmed by 0.25%, and Soybean prices weakened by 0.9%.
CAD continues under pressure, falling 2.2% in December, testing near 5-year lows hurt by political uncertainty and expectations of widening interest rate divergence between the Fed & BoC in 2025. "Sentiment is still pretty negative on the Canadian economy and the macro backdrop. Add in the political dysfunction, which does not look kindly on the Canadian dollar at this point," said Reitzes, Canadian rates and macro strategist at BMO Capital Markets. Canada's annual inflation rate declined to 1.9% in November, down from 2% in October, increasing expectations that the BoC will cut 25bps in January. Intraday, the Fed interest rate decision & FOMC statement will be the primary driver for the loonie today.
EURCAD continues to rise, up 1.5% in December. Canadian political uncertainty and a more dovish BoC are keeping pressure on the loonie.
EUR continues to be sidelined, straddling 1.0500 ahead of the Fed rate decision. The euro extends its consolidation around 1.0500 as investors remain on the sidelines ahead of today's critical US interest rate decision, the Summary of the Economic Projections (SEP) and the FOMC statement. ECB policymaker Wunch told Reuters today that a weaker euro falling to parity with the USD would cushion the impact of any new US tariffs on eurozone growth, although it would push up inflation. Technically, a break of 1.0333, the 2024 lows seen in November, would open up the potential of a retest of parity.
GBPEUR holds steady, with investors sidelined ahead of today's Fed interest rate decision and Thursday's BoE interest rate decision.
GBP held steady above 1.2700 heading into the US interest rate decision. The pound rebounded from early losses after the UK inflation rate rose to 2.6% in November from 2.3%, as forecasted. Money markets expect the Bank of England to keep interest rates on hold on Thursday and anticipate the BoE will cut rates by just 50 bps by the end of 2025. Investors will be focused on the Fed's rate decision and statement, which is expected to take a hawkish shift in 2025.
For clients based in the European Economic Area, payment services for Payments International Inc. are provided by CurrencyCloud B.V..Registered in the Netherlands No. 72186178. Registered Office: Nieuwezijds Voorburgwal 296 - 298, Mindspace Nieuwezijds Office 001 Amsterdam.CurrencyCloud B.V. is authorised by the DNB under the Wet op het financieel toezicht to carry out the business of an electronic-money institution (RelationNumber: R142701).
For clients based in the United States, payment services for Payments InternationalInc. are provided by The Currency Cloud Inc. which operates in partnership with Community Federal Savings Bank (CFSB) to facilitate payments in all 50 states in the US. CFSB is registered with the Federal Deposit Insurance Corporation(FDIC Certificate# 57129). The Currency Cloud Inc is registered with FinCEN and authorised in 39 states to transmit money (MSB Registration Number:31000206794359). Registered Office: 104 5th Avenue, 20th Floor, New York , NY10011.
For clients based in the United Kingdom and rest of the world, payment services for Payments International Inc. are provided by The Currency Cloud Limited. .Registered in England and Wales No. 06323311. Registered Office: StewardshipBuilding 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic MoneyRegulations 2011 for the issuing of electronic money (FRN: 900199)
