Global markets will be dominated by central bank activity and critical economic data releases. Investors will closely monitor developments that could set the tone for the remainder of the year.
Wednesday’s trading session is likely to be highly volatile, driven by the Fed’s policy announcement and US CPI data. Interest-sensitive sectors such as technology, financials, and real estate could experience sharp movements.
KEY INDICATORS
Inflation data releases
US CPI Report: November’s Consumer Price Index will be released, providing a fresh look at inflation trends ahead of the Fed’s announcement. A higher-than-expected reading could fuel speculation of further tightening, while softer data may boost risk assets.
Federal Reserve policy decision
FOMC Meeting Outcome: The Federal Reserve’s interest rate decision will take centre stage. Markets will look for signals on whether the Fed maintains its current stance or adjusts policy in response to recent inflation and labour market data.
Press Conference Insights: Fed Chair Jerome Powell’s remarks will be scrutinised for guidance on future rate paths, with significant implications for equities, bonds, and the US dollar.
Global Central Bank expectations
ECB Speculation: Markets will begin positioning for the European Central Bank’s meeting later in the week, focusing on potential policy adjustments amid ongoing growth concerns.
Emerging Market Central Banks: Policy signals from emerging economies, particularly in Asia and Latin America, could drive regional equity and currency movements.
MARKET MOVERS
EUR/USD
Possible short preference Short positions below 1.04899 with targets at 1.04734 & 1.04579 in extension. Alternative scenario Above 1.05263 look for further upside with 1.05387 & 1.05673 as targets. Euro retreats below key support ahead of US inflation report
How could the US Consumer Price Index report affect EUR/USD?
The upcoming Trump administration is expected to adopt a stricter stance on immigration, a more relaxed approach to fiscal policy, and a reintroduction of tariffs on imports from China and Europe.
Together, these factors are likely to exert upward pressure on inflation, potentially prompting the Fed to pause or even halt its ongoing easing cycle, thereby providing additional support to the US dollar (USD).
Currently, markets are pricing in an approximately 85% probability that the Fed will lower rates by 25 basis points in December.
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as the Consumer Price Index (CPI).
The MoM print compares the prices of goods in the reference month to the previous month.
The CPI Ex Food & Energy excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.
On a monthly basis, the headline CPI and core CPI are forecasted to rise by 0.3%.
Heat map showing percentage change of major currencies against one another. In focus is the EUR, which was the weakest against the US dollar.
Crude Oil WTI
Possible long preference Long positions above 69.11 with targets at 69.87 & 70.31 in extension. Alternative scenario Below 68.65 look for further downside with 68.31 & 67.91 as targets. Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
TODAY’S NEWS HEADLINES
Dollar holds ground ahead of CPI, Aussie wallows near 4-month low
The dollar traded close to a two-week high versus the yen on Wednesday ahead of a highly anticipated reading of US inflation that could provide clues on the pace of Federal Reserve interest rate cuts.
The Australian dollar sagged near a four-month low after a dovish tilt to the central bank’s policy outlook a day earlier.
The dollar eased 0.12% to 151.80 yen as of 0:45 AM GMT but remained close to the overnight peak of 152.18 yen, its strongest level since 27 November.
Traders currently assign 85% odds to a quarter-point rate cut by the Fed on 18 December.
Economists expect both headline and core consumer prices to have risen 0.3% in November, from previous increases of 0.2% and 0.3%, respectively.
Oil prices edge up on demand hopes from China’s ‘looser’ monetary policy
Oil prices rose slightly early on Wednesday, with market participants expecting to see demand rising in China next year after Beijing announced a looser monetary policy to stimulate economic growth.
Brent crude futures gained 10 cents, or 0.14%, to USD 72.29 a barrel by 1:31 AM GMT.
US West Texas Intermediate crude futures rose 9 cents, or 0.13%, to USD 68.68.
Official data on oil stocks from the US Energy Information Administration is due on Wednesday at 3:30 PM GMT.
Analysts polled by Reuters expect a 900,000-barrel decline in crude and a 1.7 million-barrel increase in gasoline.
Gold touches two-week peak; US inflation data in focus
Gold prices scaled a two-week peak on Wednesday, supported by escalating geopolitical tensions and expectations of another rate cut by the US Federal Reserve next week, and ahead of the closely watched US inflation report later in the day.
Spot gold was up 0.2% at USD 2,698.47 per ounce, as of 2:53 AM GMT, and hit its highest since 25 November.
US gold futures rose 0.6% to USD 2,734.70.
The Fed is likely to cut rates by 25 basis points on 18 December, according to 90% of economists, with most expecting a pause in late January amid concerns over inflationary risks.
