Written Commentary
CURRENCIES
U.S. dollar index futures are lower after five consecutive days of gains.
Industrial production in the euro area showed no growth in October 2024, after a 1.5% decline in September and compared with market predictions of a 0.1% decrease.
Germany’s wholesale prices fell by 0.6% year-on-year in November 2024 after a 0.8% drop in October.
Exports from Germany dropped by 2.8% month-over-month to nearly a three-year low in October 2024, compared with market estimates of a 2.0% decline.
The U.K. economy shrank for a second month in a row in October, which are the first back-to-back declines in output since the COVID-19 pandemic. Gross domestic product contracted by 0.1% month-on-month in October, as it did in September. Economists estimated a monthly expansion of 0.1%.
It is widely expected that the Bank of England will keep its bank rate unchanged at 4.75% at its policy meeting on December 19. However, lower interest rates from the BOE are predicted next year.
The fundamentals and technicals remain supportive to the U.S. dollar, and higher prices are likely.
The fundamentals and technicals remain bearish for the euro currency and the British pound, and lower prices are likely.
The Bank of Japan will hold a policy meeting on December 19. Many analysts now believe the central bank will skip a rate hike at next week’s meeting.
STOCK INDEX FUTURES
Stock index futures are higher.
Import prices in November increased 0.1% when down 0.3% was expected, and export prices were unchanged when a decline of 0.1% was anticipated.
There are indications that the U.S. economy will perform better than the consensus view in 2025.
The long term fundamentals and technicals remain supportive to stock index futures.
INTEREST RATES
Futures are lower.
There are no Federal Reserve speakers scheduled between now and the December 18 Federal Open Market Committee meeting, which is in keeping with the central bank’s self-imposed blackout period in advance of policy meetings.
There is a 97% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its December 18 policy meeting, and there is a 3% chance of the FOMC keeping rates unchanged at 4.50% – 4.75%.
The U.S. economy is likely to hold up relatively well, which may cause the FOMC will be slower to add accommodation in 2025 than the consensus view.
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