The stock market will close at 1pm ET (1800 GMT) while the bond market will close at 2pm ET (1900 GMT) later today. It’s the festive period after all and holiday thin liquidity just means it is tough to make sense of price movements during this time. For those interested, here’s how the S&P 500 has performed on Christmas Eve in the past:

• 2018: -2.71%
• 2019: -0.02%
• 2020: +0.35%
• 2021*: +0.62%
• 2022*: +0.59%
• 2023*: +0.17%

*23 December was the last official trading day before Christmas Day

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

For the longest of time now, the pair has been caught within a 1,000 pips range over the last eight years. And that’s just the extremes in certain years. Most of the time, the pair has nestled within a much tighter range during this period. But with the over 4% decline this year, there is a chance for sellers to finally break the mould.

The pair is once again running into a test of the 0.8300 handle and has been testing waters below that in December trading. The last real attempt to break below that came back in 2022 but that was defended by the 200-month moving average (blue line) at the time. This time around, sellers have already broken below that as well as the 100-month moving average (red line). That suggests a stronger downside bias for the pair on any major technical break now.

The March 2022 low is seen at 0.8202 but a firm monthly close under 0.8300 may yet be enough to set up a platform for sellers to take a run towards the downside and break this eight-year range in the pair.

From a fundamental perspective, the conditions are also lining up accordingly – at least as we look towards the start of next year.

The ECB looks poised to keep cutting rates as the euro area economy is in the dumps. And that is not to mention the prospects of a trade conflict with the US amid Trump’s tariffs. That will keep the pressure on the ECB to stick with their current rate cut path.

As for the BOE, they are still keeping a more gradual approach. And that means some rate cuts with a pause every now and then perhaps. Inflation has come down but not as much as they’d hope and the economy isn’t exactly pushed to the brink just yet. We are seeing things slow down in 2H 2024 but policymakers are not yet thrown into the frying pan for now.

That being said, if the UK economy does face stronger headwinds next year, that might change the picture and weigh further on the pound. After all, traders are only pricing in just a little over two rate cuts by the BOE for next year currently. As such, a step up there could weigh on sterling and provide some support for EUR/GBP.

I reckon that’s the only condition that might play into a positive bounce for EUR/GBP at the moment. Otherwise with EUR/USD slated for parity, it might be tough to fight a weaker euro outlook alongside a technical downside break to start the new year. So, definitely one of the more interesting charts to watch out for in major FX as we look towards 2025.

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

Let’s dive straight into it with the first meeting date and what market players are pricing in for that.

• Fed: 29 January (~91% probability of no change, ~9% probability of a 25 bps rate cut)
• ECB: 30 January (~99% probability of a 25 bps rate cut, ~1% probability of no change)
• BOJ: 24 January (~54% probability of no change, ~46% probability of a 25 bps rate hike)
• BOE: 6 February (~59% probability of no change, ~41% probability of a 25 bps rate cut)
• SNB: 20 March (~78% probability of a 25 bps rate cut, ~22% probability of a 50 bps rate cut)
• BOC: 29 January (~63% probability of a 25 bps rate cut, ~37% probability of no change)
• RBA: 18 February (~50% probability of a 25 bps rate cut, ~50% probability of no change)
• RBNZ: 19 February (~59% probability of a 50 bps rate cut, ~41% probability of a 25 bps rate cut)

As for the year itself, these are what the rates market is pricing in for the coming 12 months:

• Fed: -36 bps
• ECB: -111 bps
• BOJ: +45 bps
• BOE: -55 bps
• SNB: -53 bps
• BOC: -54 bps
• RBA: -74 bps
• RBNZ: -112 bps

As a reminder, take these with a pinch of salt. It’s all a fluid situation and these odds and pricing can shift quite dynamically in the first half of the year especially.

This time last year, traders were pricing in six rate cuts by the Fed for 2024 with the first one priced in for March. We then swung as much to pricing in just one rate cut during the middle of the year before going back to settle around two to three. At the end of the day, the Fed did cut rates by three times this year but the one in September was a 50 bps move.

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

With China, it’s always hard to tell. But the big question is, are things really different for China this time around as compared to all their promises over the last few years? They’ve definitely stepped up the rhetoric but I want to say that actions speak louder than words at the end of the day. Chinese equities have endured a rough period of three straight years of declines but they will be snapping that in 2024. However, it owes much to the brief surge right before the Golden Week holiday going into October:

Domestic demand conditions are extremely subdued. And when you couple that with low inflationary pressures and the collapse of the property sector in recent years, it’s tough to build things back up from the ground. That is not to mention the more challenging outlook globally with Europe supposedly wanting to diversify from China and the ongoing trade war with the US. The latter is set to intensify further once Trump takes office next year.

There’s been a lot of big promises from Beijing to do more as per their big announcements since the lead up to the Golden Week holiday. But as seen by the chart above, investors are still holding some reservations.

The surging rally has come to a halt and there has been some consolidation only afterwards. A sign of caution perhaps? Or are investors biding their time for the next big announcement to dive back in again?

China has always been an interesting opportunity for investors no matter where you’re from. The last few years have been tough but that is expected as their handling of the Covid pandemic has been less than ideal. Hence, the rebound has been much slower.

I want to say there’s a lot of investor „angst“ towards China but not in the traditional sense. It’s more of a case that investors tend to regard China as a strong growth hub and recent years have made valuations there very, very cheap. So, it’s a case of them wanting China to bounce back and to get in on the action.

I don’t think we’re reaching a point of desperation just yet. But perhaps we’re arguably at a stage where investors are trying to will something to happen on just about any optimistic sign they can get.

That could lead to a couple of modest bounces for Chinese stocks as we look towards next year, similar to the spike seen above.

But in the bigger picture, I want to say that Beijing has to do more on the fiscal front to really convince. They can pull whatever numbers out of their behind on the economy but it’s not a great indication when nobody believes it.

And with the demographic challenge that China is facing over the next few decades, it’s going to be a major issue if they can’t steer the ship in the right direction from the onset. Japan 2.0 may be the future that they are looking at.

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

Goldman Sachs from earlier this week (Bloomberg TV interview) on Chinese equities. Analysts at GS say stocks in China are supported on a dip in price next year. Chinese stocks face limited downside in 2025. GS cite:

• market has factored in trade tension risks already
• domestic stimulus measures offer a buffer against any further selloff
• market participants expect more concrete measures to boost consumption
• equity valuations have come off their October peak
• potentially improving fundamentals for companies
• GS forecasts 7% earnings growth for the MSCI China gauge in 2025, and 10% in 2026
• 60% US tariff hike on Chinese goods is unlikely, but if so 10% valuation downside from the current level

***

We’ve just had some announcements from China’s Ministry of Finance on further stimulus measures ahead (nothing specific yet):

• China finance ministry announce fiscal support measures

Reuters collated the headlines more broadly:

• China will step up fiscal spending and accelerate the pace of spending in 2025, according to the Finance Ministry.
• Fiscal spending will focus more on improving people’s livelihood and boosting consumption, the Finance Ministry stated.
• The government will arrange for larger-scale issuance of government bonds to provide additional support for stabilizing growth, the Finance Ministry reported.
• Efforts will be made to fend off risks in key areas, said the Finance Ministry.
• The government will further increase transfer payments to local governments to strengthen their financial capacity, according to the Finance Ministry.
• China will support the expansion of domestic demand, said the Finance Ministry.
• The Finance Ministry announced plans to appropriately increase the basic pensions for retirees and raise the basic pensions for urban and rural residents.
• Support will be provided for building a modern industrial system in 2025, with full efforts directed toward achieving breakthroughs in core technologies, the Finance Ministry stated.
• The government will actively expand effective investment, reasonably arrange bond issuance, and use government investment to drive more social investment, the Finance Ministry said.
• Efforts will be made to resolutely prevent issues such as arbitrary charges, fines, and unreasonable distribution of costs, according to the Finance Ministry.
• Tariff policies will be improved, and cooperation with ‚Belt and Road‘ countries will be deepened, the Finance Ministry reported.
• China will comprehensively deepen fiscal and tax system reforms and effectively prevent and resolve local government debt risks, the Finance Ministry stated.

This article was written by Eamonn Sheridan at www.forexlive.com.