Goldman Sachs provides insights into the expected monetary policy paths of the Federal Reserve (Fed) and the European Central Bank (ECB), forecasting the timelines for rate cuts and stabilization of policy rates.

Key Insights:

1. Federal Reserve Policy Outlook:
   • Hold on Rates: The Fed is expected to maintain the current federal funds rate range of 5.25-5.5% into 2024.
   • First Rate Cut in 4Q24: Goldman Sachs anticipates the initial rate cut to occur in the fourth quarter of 2024, proceeding at a pace of 25 basis points per quarter.
   • Higher Equilibrium Rate: The stabilization of the Fed funds rate is projected at a range of 3.5-3.75%, indicating a higher equilibrium rate compared to the previous cycle.

2. European Central Bank Policy Outlook:

   • End of Hiking Cycle: The ECB’s rate hiking cycle is believed to have concluded, with rates expected to remain on hold at 4.00%.
   • First Rate Cut in 3Q24: The initial reduction in rates is forecasted for the third quarter of 2024, followed by a consistent cut pace of 25 basis points per quarter until the end of 2025.
   • Policy Rate Projection: The ECB’s policy rate is anticipated to reach 2.5% by the fourth quarter of 2025.

3. ECB Balance Sheet Policy:

   • PEPP Reinvestment Limitation: Starting from the second quarter of 2024, the ECB is expected to limit Pandemic Emergency Purchase Programme (PEPP) reinvestments to EUR 10 billion per month.
   • Halting Reinvestments: A complete stop in all reinvestments is projected from the third quarter of 2024.

Conclusion:

Goldman Sachs‘ analysis suggests a cautious and gradual approach by both the Federal Reserve and the European Central Bank in unwinding their current tight monetary policies. While the Fed is expected to start easing rates in late 2024, the ECB is predicted to begin its rate cuts a bit earlier in mid-2024. Both central banks are projected to follow a measured pace in reducing rates, reflecting ongoing economic and inflationary considerations.

For bank trade ideas, check out eFX Plus. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. Get it here.

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

The Nasdaq Composite this week rallied into a key
swing level following the miss in the US CPI report. The
market is still trading based on the inflation and interest rates expectations
and ignoring the deteriorating labour market and growth data. The lack of a
rally following the better than expected US Retail Sales data and
the miss in the US PPI and Jobless Claims figures
though, might be a sign that the rally got overstretched and we could see at
least a pullback.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq Composite
is consolidating just below a key swing level at 14155 after an incredible
rally following the miss in the US CPI report. We can also notice that the price
got a bit overstretched as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that in case we get
a pullback, the buyers might want to lean on the support zone
around the 13700 level where they will also find the red 21 moving average for confluence. The
sellers, on the other hand, are likely to step in already at these levels with
a defined risk above the high to position for a drop into the support.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the price
is diverging with
the MACD right
at the key resistance. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, the buyers might also want to
lean on the upward trendline where
there’s also the 38.2% Fibonacci
retracement level for confluence. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into the support zone.

This article was written by FL Contributors at www.forexlive.com.

• To ban sales to Russia, or for use in Russia, of tankers, of any origin, for crude oil or petroleum products
• To ban direct or indirect import, purchase or transfer of diamonds from Russia
• Ban includes stones processed in third countries
• To phase in ban on Russian diamonds processed in third countries from March next year

Whatever the case is, it isn’t going to get Russia to budge. We’re well over a year into the conflict between Russia and Ukraine and this looks to be the new normal in the region already.

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

It’s shaping up to be a rough end to the week for the dollar as markets are finally following through on the moves on Tuesday. Treasury yields are pushed lower and the greenback is suffering for it, with USD/JPY now down 0.9% to 149.30 on the day.

10-year yields are down 5.2 bps to 4.392% and stocks are looking to work with that to finish the week with a flourish. European indices are up roughly 1% while S&P 500 futures are now up 0.2% on the day after a bit more of a tentative start.

Going back to the dollar, it is even trading lower against the euro and pound now with EUR/USD up 0.2% to 1.0870 and GBP/USD up 0.2% to 1.2433. The latter traded to a low of 1.2375 earlier on after softer UK retail sales data.

The antipodeans are also capitalising on that, with AUD/USD testing waters above 0.6500 again in trying to chase a technical breakout as outlined here.

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

• Markets should know that it’s not the end of the story yet
• Anything can happen in December meeting

Interestingly enough, when asked if he does rule out a rate cut in Q2 next year, he replies „that would be a bit early“. It’s a confusing one as does it mean it is too early to rule out rate cuts or does he deem that Q2 is too early to think about rate cuts? I reckon he means the latter but comments like this can be lost in translation at times.

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

It’s been a back and forth last few days for AUD/USD but it looks like perhaps buyers are finally about to win out the week. With the dollar tumbling alongside bond yields today, the aussie is managing to pick itself back up to trade above 0.6500 currently. And in this instance, it’s a second chance for redemption for buyers in trying to clinch a key technical break.

The second bite of the cherry if you will is the attempt to hold a firm break above 0.6500 and the 100-day moving average (red line).

That will solidify a stronger bullish momentum going into next week, as the better risk mood in stocks is also helping out with the upside push. The next key target to watch if this is held will be the 200-day moving average (blue line) at 0.6593 currently.

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

• Europe’s financial system has avoided the worst-case scenario of severe systemic risks materialising at the same time
• Policymakers need to remain proactive and alert to financial stability risks as and when they arise
• Firmly convinced that the joint action of the EU financial stability community at large will be sustained and unwavering
• That allows the warnings issued to help avoid damage to the economy
• Full speech

There’s nothing in there on monetary policy, so carry on as you will.

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

Even if we are seeing a lack of follow through after the Tuesday moves, equities are still in a comfortable spot. US futures are little changed and flattish today but it doesn’t distract from the strong gains already posted so far this week. All three major indices in the US are up 2% on the week so far. And as mentioned here yesterday, the technicals are still looking good – at least for now.

For now, cautious optimism is still prevailing as market players are sizing up what may happen next in the bond market. The rally there in the past few weeks has been helpful but amid the waves of supply still to come in Treasuries, there is still some deep-seated fear among investors that the selling could return.

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

Cryptocurrency adoption
has been steadily growing in various parts of the world, with Africa emerging
as one of the regions showing significant potential for its expansion. In
recent years, countries across Africa have witnessed a surge in the interest
and usage of digital currencies. This trend can be attributed to several
factors, including economic instability, limited access to financial services,
and the potential benefits offered by cryptocurrencies.

Economic Instability

One of the primary drivers of cryptocurrency adoption in
Africa is the persistent economic instability that many countries in the region
face. Frequent inflation, volatile local currencies, and weak banking systems
have made traditional financial systems unreliable. As a result, people are
turning to cryptocurrencies as an alternative form of currency that can provide
stability and security.

Limited Access to Financial Services

Africa is home to a large unbanked population, with millions
of individuals lacking access to formal financial services. Traditional banking
systems often fail to reach remote areas, leaving people without the ability to
save money or engage in transactions. Cryptocurrencies, on the other hand, can
be accessed via mobile phones and do not require a physical presence. This
accessibility has made cryptocurrencies a viable solution for financial
inclusion, enabling individuals to participate in the global economy.

Benefits of Cryptocurrencies

Cryptocurrencies offer several advantages over traditional
payment methods, particularly for Africans. First, digital currencies
facilitate cross-border transactions without the need for intermediaries, such
as banks or remittance services. This feature is especially beneficial for
African migrants who want to send money back home quickly and at lower costs.

Second, cryptocurrencies provide a more secure and
transparent means of conducting transactions. Blockchain technology, the
underlying technology behind cryptocurrencies, ensures that each transaction is
recorded and cannot be altered. This transparency reduces the risk of fraud and
corruption, which are prevalent issues in some African countries.

Lastly, cryptocurrencies offer a store of value and
investment opportunities. With the rise in the value of popular
cryptocurrencies like Bitcoin and Ethereum, many Africans see digital assets as
a way to secure their wealth and grow their investments. This has attracted a
significant number of individuals, including tech-savvy youth and
entrepreneurs, to explore the world of cryptocurrencies.

Challenges and Future Outlook

While the adoption of cryptocurrencies in Africa is growing,
there are still challenges that need to be addressed. Regulatory frameworks for
digital currencies vary across countries, with some governments expressing
concerns about potential risks associated with their use. Additionally, there
is a need for increased education and awareness about cryptocurrencies to
ensure users understand the risks and benefits involved.

However, despite these challenges, the future outlook for
cryptocurrency adoption in Africa remains promising. The continent has
witnessed numerous innovative solutions using blockchain technology, such as
mobile payment platforms and decentralized finance applications. These
developments indicate the potential for cryptocurrencies to revolutionize
financial systems and drive economic growth across Africa.

In conclusion, the adoption of cryptocurrencies in Africa is
on the rise due to economic instability, limited access to financial services,
and the benefits offered by digital currencies. While challenges exist, the
continent shows tremendous potential for harnessing the power of
cryptocurrencies to promote financial inclusion and stimulate economic
development. As regulatory environments evolve and awareness increases, Africa
could become a major player in the global
cryptocurrency market.

This article was written by FL Contributors at www.forexlive.com.

The Dow Jones surged to new highs following the
miss in the US CPI report.
Looks like the market is still trading based on the inflation and interest
rates expectations and ignoring the softening in the labour market and growth
data. Yesterday, the US Retail Sales were
more tepid compared to the prior months, but they still came out better than
expected, and the US PPI data
missed forecasts by a big margin across the board. The bears are having a hard
time to fight this positive sentiment and perhaps it will take a clear uptrend
in the unemployment rate to switch the market’s focus.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones surged
into the key resistance at 35000
following the miss in the US CPI report. This rally looks a bit overstretched
as depicted by the distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move. The sellers are likely to step in around
this resistance to position for a drop back into the 34000 level.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that in case of a
pullback, the buyers might lean on the upward trendline where
they will find the blue 8 moving average for confluence. The
sellers, on the other hand, will want to see the price breaking below the
trendline to increase the bearish bets into the 34000 support.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
price is diverging with
the MACD right
at the key resistance level. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, it might be another
signal for an imminent pullback. Moreover, we can see that the buyers will also
find the 38.2% Fibonacci
retracement level for confluence around the trendline.

Upcoming Events

Today the market’s focus will be on the latest US
Jobless Claims figures given the recent softening in the labour market data.

This article was written by FL Contributors at www.forexlive.com.