Live Comments Page 23

Live Comments

Latest

SNB and ECB in spotlight as markets gauge depth of cuts and dovish signals

By

ActionForex.com

-

Dec 12 24, 07:09 GMT

Today’s focus is firmly on the monetary policy decisions from SNB and ECB, with markets eager to gauge not just the magnitude of the expected rate cuts but also the tone of their forward guidance. Both central banks are expected to ease, but the precise depth of the cuts and their outlook on future policy will drive market reactions.

SNB is widely anticipated to cut its policy rate by 25bps 1.00% to 0.75%. However, speculation of a more aggressive 50bps cut persists, with financial market pricing increasingly leaning toward this scenario.

SNB has considerable room to maneuver, given Switzerland’s inflation rate of just 0.7%—the lowest among major economies. However, with rates already close to zero, SNB must balance immediate economic support with preserving policy ammunition for the future.

After all, today’s move will not mark the end of the easing cycle of SNB, as economists project further reductions through 2025, driving the policy rate to 0.25% or even zero by the end of next year.

For ECB, the debate has also revolved around the scale of its next move. Recent speculation about a 50bps cut has largely been dismissed following comments from ECB officials, leaving a 25bps reduction in the Deposit Rate to 3.00% as the more probable outcome.

However, market participants are paying close attention to the tone of ECB’s statement and press conference. With inflation expected to settle earlier at target by mid-2025 amid weak economic activity, ECB would signal explicitly the need for sustained easing into next year.

Investors currently expect a cut at every meeting until mid-2025, with the Deposit Rate potentially reaching 1.75% by year-end. However, such an aggressive pace could bring rates below the neutral level.

In terms of market impact, EUR/CHF is the currency pair to watch. Outlook is clearly bearish with EUR/CHF staying well below falling 55 D EMA. However, in case of another dive, 0.9209 key support might continue to provide support for a bounce a second time, barring any drastic surprises. Meanwhile, there would be no clear confirmation of bullish reversal until decisive break of 55 D EMA (now at 0.9362).

US CPI sets to drive EUR/USD for downside breakout

By

ActionForex.com

-

Dec 11 24, 08:14 GMT

The spotlight today is firmly on the release of US CPI data for November. Expectations are for headline inflation to tick up from 2.6% to 2.7%, continuing its rebound from the September low of 2.4%. Meanwhile, core CPI is forecast to hold steady at 3.3%, staying in the 3.2%-3.2% range it has maintained since June.

Unless today’s data deviates significantly from expectations, it is unlikely to deter Fed from delivering a widely anticipated 25bps rate cut next week, bringing the federal funds rate to 4.25-4.50%. Fed fund futures currently reflect an 86% probability of this move.

But more critically, today’s readings could solidify the case for a pause in January, supported by futures pricing nearly 80% probability of such an outcome.

A pause would allow policymakers to digest the inflationary implications of upcoming fiscal and trade policies under President-elect Donald Trump. Current Treasury Secretary Janet Yellen cautioned that Trump’s tariffs pose a dual risk of “derail the progress” on inflation and have “adverse consequences on growth”, creating a potential headache for Fed as it balances these challenges.

Technically, EUR/USD would be a key to watch in reaction to US CPI. Recovery from 1.0330 short term bottom is seen as a corrective move, might could have completed at 1.0629 already. Break of 1.0471 support will suggest that fall from 1.1213 is ready to resume through 1.0330. Next target will be 61.8% projection of 1.0936 to 1.0330 from 1.0629 at 1.0254.

BoC to flash rates by 50bps again in quick path to neutral

By

ActionForex.com

-

Dec 11 24, 07:45 GMT

BoC is widely anticipated to lower its overnight rate by another 50bps at today’s meeting, reducing the policy rate to 3.25%. This follows a similar move in October, aimed at addressing a cooling economy where inflation has been at or below 2% for three months already, and core measures remain slightly above target. Last week’s data showing unemployment rate jumping to 6.8% from 6.5% solidified expectations of a significant rate reduction.

A recent Reuters poll highlighted this expectation, with 21 of 27 respondents predicting a 50bps cut and the remainder forecasting a more modest 25bps reduction. The primary argument for aggressive easing centers on the need to return interest rates to a neutral range, estimated between 2.25% and 3.25%. Following today’s expected cut, rates would align with the upper bound of neutral, still potentially exerting a mildly restrictive effect on the economy.

However, there is an opposing view that recent resilience in consumer spending, inflation, and labor market data could justify a slower pace of easing. This argument suggests that BoC could take a more measured approach, affording time to assess the economy’s response to October’s 50bps cut before making further moves.

Regardless, the debate now shifts to determining the eventual terminal rate, with clarity likely, hopefully, to emerge only in January’s Monetary Policy Report.

Technically, similar to other Yen crosses, CAD/JPY’s corrective rebound from 101.63 should have completed with three waves up to 111.55. Further decline is expected as long as 55 D EMA (now at 108.65) holds. Break of last week’s low at 105.75 will resume the fall from 111.55 towards 101.63 low, and possibly through it to resume the larger decline from 118.85. However, the speed of the decline could more hinge on the development in Yen than Loonie.