• To continue supportive monetary policy direction next year
• Will strengthen counter-cyclical adjustments
• Will promote stable developments of real estate, capital markets
• Wil enhance monitoring of M2 and other levels of money supply, social liquidity

The language on monetary policy this year has been consistent in that they will make it „supportive“. It looks like with the troubling state of the Chinese economy, they will have to carry that over into next year as well. Besides that, Pan is staying in his lane as he doesn’t make any quib remarks about the fiscal side of things.

This article was written by Justin Low at www.forexlive.com.

Considering economic developments, it would make sense for them to discuss a potential 50 bps rate cut. But as the job is not quite done yet on inflation, it may be an overreach to move that quickly especially with core inflation still seen at 2.7% in the latest report here. The disinflation process is facing a couple of bumps and I doubt policymakers will be too confident in dismissing that for now.

This article was written by Justin Low at www.forexlive.com.

Fundamental
Overview

The US Dollar continues to
pull back from the highs as the market reached the peak in the repricing of
interest rates expectations and it will need stronger reasons to price out the
remaining rate cuts for 2025.

This was signalled by the
lack of US Dollar strength after lots of strong US data with the market’s
pricing remaining largely unchanged around three rate cuts by the end of 2025.
We might see the greenback remaining on the backfoot at least until the US CPI
due next week.

On the JPY side, the latest
Tokyo CPI showed inflation accelerating across the board. BoJ Governor Ueda
said that interest rate hikes are nearing as economic trends develop in line
with the central bank’s forecasts.

The market is pricing a 58%
chance of a rate hike in December and a total of 51 bps of tightening by the
end of 2025. We will get the Japanese wage data on Friday and an upside
surprise might give the JPY another boost. The December meeting is now
definitely live.

USDJPY
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that USDJPY eventually fell all the way back to the 149.50 level. The price
bounced from it as the buyers stepped in with a defined risk below the level to
position for a rally back into the highs. The sellers will want to see the
price breaking lower to increase the bearish bets into new lows.

USDJPY Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that from a risk management perspective, the sellers will have a much
better risk to reward setup around the 151.90 level where we can find the confluence of the trendline and the 38.2% Fibonacci retracement level. The buyers, on the other
hand, will look for a break above that resistance zone to increase the bullish bets
into the 160.00 handle next.

USDJPY Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we a minor resistance zone around the 150.50 level where the price
reacted from several times in the past days. We can expect the sellers to step
in again here to position for the break below the 149.50 support. The buyers,
on the other hand, will look for a break higher to increase the bullish bets
into the 151.90 resistance. The red lines define the average daily range for today.

Upcoming
Catalysts

Today, we
have the US ISM Manufacturing PMI and Fed’s Waller speaking. Tomorrow, we get
the US Job Openings data. On Wednesday, we have the US ADP, the US ISM Services
PMI and Fed Chair Powell speaking. On Thursday, we get the latest US Jobless
Claims figures. Finally, on Friday, we conclude the week with the Japanese
Average Cash Earnings and the US NFP report.

See the video below

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Trump has been blasting away on Truth Social.

First off, Trudeau flew down to Mar-a-Lago to meet with him and they’re smiling in the picture. The tweet (or whatever you call it) is mostly upbeat.

Separately, Trump went on a rant about BRICS countries and not using the dollar. This is a canard, Trump will be long dead (and so will I) before BRICS countries have any kind of institutions in place to launch a collective currency. Yes, they’ll probably add to gold reserves and do more bi-lateral trade but these things move at a glacial pace.

That said, his line of thinking here doesn’t exactly jive with an effort to weaken the dollar, which is a risk I’m mulling. Still, this is sound and fury, signifying nothing.

Here’s how CFR senior fellow Brad Setzer sums it up:

Curious how former President elect Trump ever became convinced that the nowhere close to happening BRICs currency was a threat to the dollar …

It isn’t a good look, as it indirectly elevates the stature of a non-threat and suggests a lack of confidence in the dollar.

My personal view is that trying to coerce countries into using the dollar (which they voluntarily do now, apart from those facing serious sanctions) is actually a long-run threat to the dollar’s global role. It makes the use of the dollar appear to be a favor to the US And 100% tariffs would have essentially no impact on Russia, as there is almost no direct trade between the US and Russia right now..

Not sure Trump would like the results of a trade war with Brazil either, as it is a country that tends to use its surplus from exporting iron and ‚beans to China to buy US goods, and thus the US tends to run a bilateral surplus with Brazil.

The US does run a deficit with India (despite large US energy exports), but not sure that the US would really like the impact of 1 00% tariffs on India either — as it pushes India away from alignment with the US + makes India less attractive as a substitute for China.

And of course 100% tariffs on imports from China would be one hell of a shock to the US — Apple would have to pay $350-400 (the current import price more or less) per phone in taxes to the US government, so an iPhone price would go up a lot. And the price of a lot of parts that the US still imports from China would soar, along with the price of many consumer goods (until work arounds are found). So it isn’t in my view a credible threat to do 100% tariffs (the impact on the US would be huge) … and it is in response to chatter about a BRICs currency that is going nowhere and simply isn’t currently a real risk to the US economy. So I really don’t get it … and I certainly hope Mr. Bessant isn’t egging President elect Trump on here.

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

China released its official PMIs for November and the numbers are a mixed bag as Beijing contemplates further stimulus for 2025:

• Manufacturing 50.3 vs 50.1 prior (50.2 was expected)
• Non-manufacturing 50.0 vs 50.2 prior
• Composite 50.8

This is the second straight month of gains for the manufacturing index.

On Friday, I highlighted fresh rumors about Chinese stimulus.

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

• Canada Q3 GDP +1.0% vs +1.0% expected
• JPMorgan now sees the ECB cutting rates by 50 basis points in December
• US equity close: Big finish to a great month
• December forex seasonals: What’s hot, cold and gold in the month of December

Markets:

• JPY leads, USD lags
• US 10-year yields down 6 bps to 4.18%
• S&P 500 up 0.6%
• Gold up $13 to 2653
• WTI crude oil down $0.57 to $68.00

Markets were surprisingly lively for a de facto US holiday. Bids were strong in risk assets, which got help from a report saying US restrictions on chip exports may not be as strict. At the same time, softer eurozone inflation numbers might have fuelled a broader bid in bonds.

The Canadian GDP report also underscored a picture of a slowing global economy with rates that are needlessly high.

At the same time, it’s tough to square slowing growth in Europe and Canada with stronger currencies against the US dollar. Many are pointing to month end as the source of the Treasury bid and USD softness. Others point to the pick of Scott Bessent or fresh rumors about Chinese stimulus.

We will get answers about the turn of the calendar on Monday and I will be keeping a close eye on USD/JPY, as it appears to be embarking on the same kind of dramatic breakdown that we saw in the summer. That eventually spread to risk assets so some caution is warranted, though US economic data hasn’t shown many cracks yet.

Have a great weekend.

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

I love it when the month ends on a Friday, it’s so tidy. And there was plenty of love to go around in markets in November following the US election.

Closing changes:

• S&P 500: +0.6%
• Nasdaq Comp: +0.8%
• DJIA: +0.4%
• Russell 2000: +0.65%
• Toronto TSX Comp: +0.3% (note that the TSX doesn’t close until 4 pm ET)

On the week:

• S&P 500: +1.1%
• Nasdaq Comp: +1.1%
• DJIA: +1.4%
• Russell 2000: +1.5% (finally breaks the 2021 weekly closing high but not the intraday high)
• Toronto TSX Comp: +0.7%

On the month:

• S&P 500: +5.8%
• Nasdaq Comp: +6.2%
• Russell 2000: +11.2%
• Toronto TSX Comp: +6.1%

The big winner for November? Bitcoin, which rose 38%.

As for the Russell 2000, virtually all the gains were made on election day and the day after. Eyes will be on it next week.

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

The hours of November trading are ticking down but jingle bells are ringing in the distance. That means that December trading is on the way and it’s the most wonderful time of the year for bulls.

Risk assets tend to do well in December but for stocks, the period late in the month (after Christmas) tends to be strongest. That’s particularly true in poor years as tax-loss selling hits in the first 20 days of the month. That’s certainly not the case in 2024 as it’s been a banner year for equities.

Since 1950, December has been the strongest month for the S&P 500, averaging a gain of 1.2%, though that effect has diminished in the last 25 years.

Here are some seasonals to watch:

1) Gold

I have written about gold seasonal strength in December-January for 15 years and it’s rarely let me down. It’s one of the best seasonal trends in any market, anywhere. Gold is finishing November near $2650 in what’s the first negative month since June, when it was down a single dollar. To find any kind of meaningful decline before this month, you need to go all the way back to September 2023. It’s been a remarkable run for gold and the trend is your friend.

2) Dollar weakness

December is the worst month for the dollar this century. The Dollar Index declined in six of the past seven years in December with the lone exception being a tiny decline in 2021. That’s an impressive statistic given the dollar bull market we’ve been in. The recent pullback in the dollar has been a bit of a mystery but part of the solution could be the front-running of year-end repatriation flows. In terms of fundamentals, the focus will be on whether the Fed cuts on December 18 — my bet is they will.

3) Euro strength

This isn’t a surprise given the weakness in the dollar index but it’s worth emphasizing given how hated the euro is right now. I’m sympathetic to the euro bears and a 50 basis point cut in December would certainly give them firepower. That said, the euro is hated so there might be room for a relief rally. If so, anything close to 1.10 would be a tempting spot to sell.

4) Kiwi the winner

December is the best month of the year for the New Zealand dollar as the summer sun shines in the southern hemisphere. The RBNZ this week delivered a less-aggressive rate cut than feared and that might hint at a stronger economy. In any case, there is also some technical backing here as NZD/USD has helped above the 2023 lows.

5) International stocks

It’s worth noting that while the S&P 500 has done well in December, international stocks tend to outperform. It’s a particularly strong month for Chinese stocks, which have struggled to maintain gains since late September. The Japanese Nikkei 225 is also a standout performer.

Note that many of the seasonals trends in December (including stocks) tend to reverse in January so consider taking profits late in the month.

Here is a recap of the November seasonals, which fared well.

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

The headline from today’s Canadian GDP report is that growth declined on a per-capita basis for the sixth consecutive quarter. In addition, monthly GDP data showed just 0.1% m/m growth in September and October.

CIBC writes:

„While growth in the Canadian economy slowed to a crawl in Q3, that was broadly anticipated and was mainly driven
by inventories and net trade. Domestic demand growth was much more solid and similar to the prior quarter. More
concerning for the Bank of Canada will be the monthly data that showed the quarter ending with a whimper rather
than the expected bang, leaving early tracking for Q4 well below the October MPR projection. Because of that, today’s
data are somewhat supportive of a 50bp cut at the next meeting, rather than a smaller 25bp reduction, although next
week’s employment figures will be just as important in making the final decision.“

RBC continues to see a 50 bps cut but will also be watching Friday’s jobs report closely ahead of the December 11 BOC decision:

„The
GDP numbers should help to reinforce that interest rates are higher than
they need to be to maintain inflation sustainably at a 2% rate. The BoC
will also be watching next week’s labour market data closely, but our own
base-case assumption is for another 50 basis point cut to the overnight
rate in December.“

At the moment, the BOC is projecting 2% GDP growth in Q4 but that’s likely to be scaled down and the central bank may also take a more-cautious approach for 2025, given Canadian government forecasts for a declining population.

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

The largest 250 trading firms are set to make a total of $32 billion from trading of Group-of-10
rates and $16.7 billion from currencies, according to data collected by
Coalition Greenwich and reported by Bloomberg. Those are declines of 17% and 9% compared to last year, respectively and the lowest since 2021.

I’m surprised by the decline given the volatility in fixed income and the yen.

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