Federal Reserve officials are barred from commenting on monetary policy from midnight Friday until after the December 18 FOMC decision. Given the late date for the final FOMC meeting, it could be quiet for the remainder of the month as the Christmas doldrums will kick-off soon afterwards.

There is a risk of some kind of Fed leak next week’s CPI re-shapes the picture but that’s unlikely. Given that the market is now pricing in an 85% chance of a December cut, the FOMC doesn’t need to send any kind of signal if the plan is to cut.

Cutting to 4.25-4.50% is hardly going to stoke inflation so it’s an easy call for the Fed to cut and wait to see what happens next in the broader economy.

This article was written by Adam Button at www.forexlive.com.

Morgan Stanley shares a tactically bullish stance on the USD, citing strong US data and trade policy risks. The EUR faces headwinds from weak domestic growth and tariff-related risks, while the GBP benefits from fiscal-driven growth and high rate differentials.

Key Points:

• USD:
  • View: Bullish.
  • Rationale: Strong US data and potential repricing of trade policy risks support continued strength in the USD.
  • Skew: Bullish.

• EUR:

  • View: Neutral with a bearish skew.
  • Rationale: Weak domestic growth, tariff-related risk premium, and declining rates compared to peers weigh on the EUR.
  • Skew: Bearish.

• GBP:

  • View: Neutral with a bullish skew.
  • Rationale: Fiscal-driven growth and persistent inflation keep the BoE on a gradual easing path. High front-end rate differentials remain supportive for GBP.
  • Skew: Bullish.

Conclusion:

Morgan Stanley expects the USD to maintain its upward momentum due to robust data and trade policy repricing. The EUR faces challenges from growth and rate differentials, while the GBP is poised for gains supported by fiscal resilience and attractive rate differentials.

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This article was written by Adam Button at www.forexlive.com.

WTI crude oil settled lower by $1.10 to $67.20 in the second day of selling following the OPEC+ decision to delay barrels through Q1 and bring them on more-slowly afterwards.

Oil is still within the range of the past month but is dangerously close to a test of the 2024 lows.

There are signs that OPEC’s discipline is spreading to the US. Yesterday Chevron announced that it would lower 2025 capex by $2 billion this year to a range of $14.5-15.5 billion as it said it would prioritize free cash flow over production growth.

US oil production just appear to be close to stalling at levels just above the 2019 peak in a sign the market is well-supplied and investors aren’t looking for growth. That said, production will be rising in Guyana and Canada next year, so demand will have to rise to keep the market balanced.

This article was written by Adam Button at www.forexlive.com.