Focus on Market Movements as the U.S., Japan, and U.K. Central Banks Conclude Policy Announcements Ahead of Year-End

Focus on Market Movements as the U.S., Japan, and U.K. Central Banks Conclude Policy Announcements Ahead of Year-End

Summary of This Week’s Monetary Policy Announcements

This week saw major events, including the U.S. FOMC, BOJ policy meeting, and the Bank of England’s Monetary Policy Committee (MPC). Here’s a brief summary of their outcomes and market reactions:

United States (Hawkish):

• A 25-basis-point rate cut was decided.
• The outlook for rate cuts next year was reduced from four to two.
• Fed Chair Jerome Powell emphasized a cautious stance on the pace of rate cuts, triggering dollar buying.

Japan (Dovish):

• The BOJ decided against a rate hike.
• BOJ Governor Ueda's comments strengthened the view that "no rate hikes in January" are expected, accelerating yen depreciation. USD/JPY rose to levels near 158, entering the intervention watch zone.

United Kingdom (Dovish):

• Policy rates were kept unchanged.
• The pound weakened against the dollar but remained strong against the yen and at year-to-date highs against the euro.

Current Market Trends

• USD/JPY: Rising toward 158, with caution needed for further upside due to intervention risks.
• GBP: Supported by persistent inflation, maintaining high levels against the euro.
• Cross-Yen Pairs: Continued yen weakness.

Today’s Key Events

U.S. PCE Core Deflator (November):

• Forecast: +2.9% YoY (previous: +2.8%).
• A result indicating persistent inflation could reinforce a cautious stance on rate cuts and support further dollar buying.

Other Key Indicators:

• UK Retail Sales (November), German and French Producer Prices (November), U.S. Personal Income and Spending (November), and University of Michigan Consumer Sentiment (December, final).

Speeches:

• Comments from San Francisco Fed President Mary Daly and New York Fed President John Williams are anticipated to influence markets.

Market Outlook and Strategies

Year-End Low Liquidity Risks:

With Christmas and year-end approaching, liquidity in Western markets may decrease, potentially increasing volatility and triggering position adjustments.

USD/JPY and Yen Weakness:

• USD/JPY nearing 158 increases the risk of Japanese government intervention.
• Caution is advised when chasing further upside.

GBP and EUR:

• Continued focus on economic indicators from the U.K. and Eurozone.
• Be mindful of higher volatility amid reduced trading volumes.

Christmas Trading Dynamics:

• Liquidity is expected to thin in Western markets due to the holiday season.
• Be aware of settlement delays for yen-related currency pairs.

Risk Management and Trading Tips:

• Expect short-term position adjustments and liquidity drops toward year-end, necessitating strict risk management.
• Observe the market reaction following the U.S. PCE Core Deflator release before constructing positions.
• Flexibility and adaptability will be key to navigating the year-end market movements.