Financial Markets Stabilize After Central Banks Saga
On Monday, December 18, here’s what you need to know:
The Bank of Japan is expected to announce its decision in anticipation of tomorrow’s latest policy meeting. There has been speculation concerning when the Bank would finally end its ultra-loose, negative interest rate monetary policy. Before such a change can be made, the Bank has stated that wage growth will be its key metric, leading to inflationary pressure that will drive the CPI upward to reach its target consistently. After a long period of weakness, the Japanese Yen was about to be boosted by signs of an imminent policy change. However, it now appears that such a change remains some way off.
In the wake of major central banks’ monetary policy announcements last week, markets appeared to stabilize to begin the new week after their highly volatile action. After losing more than 1% last week, the US Dollar Index remains near 102.50, while the 10-year US Treasury bond yield has stabilized slightly below 4%. The European economic docket will include IFO sentiment data from Germany and the Bundesbank’s Monthly Report. It is also crucial that market participants pay close attention to what central bank officials have to say.
With Wall Street’s main indexes closing mixed on Friday, the risk rally that was triggered by the dovish Federal Reserve surprise late Wednesday lost its momentum. The US stock index futures are modestly up on Monday, suggesting that risk mood has improved marginally.
NZD/USD
According to New Zealand data released during Asian trading hours, the Westpac Consumer Confidence Index rose from 80.2 to 88.9 in October for the fourth quarter. Additionally, the Business NZ PSI increased from 48.9 in October to 51.2 in November, marking the start of expansion territory. The NZD/USD exchange rate rose 0.5% on the day at 0.6240 after upbeat data releases.
EUR/USD
The EUR/USD traded in positive territory in the morning of European trade despite closing in negative territory on Friday.
EUR/USD
Early Monday, EUR/USD seems to have stabilized around 1.2700 after a pullback over the weekend.
USD/JPY
The USD/JPY fell below 141.00 on Thursday for the first time since late July and rebounded modestly on Friday. In the Asian session on Tuesday, the Bank of Japan will announce monetary policy decisions. The pair appears to have entered a consolidation phase above 142.00 on Monday.
XAU/USD
As the US Treasury bond yields stabilized following the sharp decline seen in the aftermath of the Fed, XAU/USD lost its bullish momentum after reaching a distance of $2,050 in the second half of last week. Currently, gold is fluctuating around $2,020, keeping it relatively quiet to begin the week.
While Asian stocks are weak, major US indices have continued to rise after hitting new two-year highs on Friday. The NASDAQ 100 Index and the S&P 500 Index are nearly new two-year highs.
As a result of attacks by Houthi forces on shipping in the Red Sea that have pushed significant shipping companies to refuse to ship goods through the Red Sea, crude oil has seen a sharp rise over the past few days after trading at a new 6-month low price. The USA is signaling that it may organize a military operation to reopen the Red Sea to shipping traffic.
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