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0 News Ghana, Latest Updates and Breaking News of Ghana, Roger A. Agana, https://newsghana.com.gh/markets-maintain-low-activity-ahead-of-final-fomc-decision/
Global markets were relatively quiet on Tuesday as participants appeared to shift into holiday mode, with low trading volumes and minimal price movement.
The subdued atmosphere continued as traders await the final Federal Open Market Committee (FOMC) decision of 2024, which could prompt more market activity later today.
Despite the lull in market action, there were notable economic updates that kept market participants engaged. In the UK, the latest labor market data showed unemployment holding steady at 4.3% for the three months ending in October, while wages increased by 5.2% year-on-year. The earnings growth exceeded expectations, but given the base effect from last year’s public sector pay increases, it raised concerns over inflationary pressures. As a result, the probability of a Bank of England (BoE) rate cut in February dropped to 60%, from over 80% earlier this week. The pound strengthened, with GBP/USD climbing back above the 1.27 mark, while UK gilt yields rose across the curve, with 10-year yields surpassing 4.5% for the first time since 2023.
However, the market’s reaction to the data suggests a potential overestimation of the BoE’s next moves. Although expectations for rate cuts have eased, traders may look to fade further yield increases, particularly if 10-year yields rise by another 10 basis points. The base case remains that the BoE will cut rates by 25bps each quarter in 2025, starting in February.
In the US, November retail sales data showed a solid increase of 0.7% month-over-month, slightly above expectations. The Control Group, a key measure for GDP, rose by 0.4%, in line with consensus. The strength of the US consumer remains evident, and with late Thanksgiving boosting holiday sales, December spending is expected to remain robust. Despite the positive data, US stocks traded lower, with both the S&P 500 and Nasdaq 100 dipping slightly as investors remain cautious ahead of the FOMC meeting and the year-end.
In Europe, a rare upside surprise came from Germany, where the ZEW sentiment survey indicated a rise in expectations to 15.7, its highest level since August. However, the IFO business climate index showed the weakest outlook since May 2020, signaling that Germany’s economy remains under pressure, especially with upcoming elections in February. The euro remained relatively stable, hovering near $1.05 for the fourth consecutive day.
Looking ahead, today’s FOMC meeting will likely be the main event for markets. A 25bp rate cut is widely expected, given recent data showing a rise in unemployment and inflation in line with expectations. However, the decision is expected to be delivered with a hawkish tone, as Fed Chair Jerome Powell seeks to retain flexibility for the central bank’s policy path in 2025. The updated dot plot is expected to show a slightly more hawkish stance, with the median fed funds rate projection likely revised higher from September’s 3.375%. The Fed’s strategy is likely to focus on balancing the risks of inflation and economic growth, while allowing for cautious policy adjustments as new data emerges.
Alongside the FOMC decision, markets will also be digesting UK CPI data, which is expected to show a modest increase in inflation. The Bank of Japan’s policy decision early Thursday morning is expected to maintain the current accommodative stance.
News Ghana, Latest Updates and Breaking News of Ghana, Roger A. Agana, https://newsghana.com.gh/markets-maintain-low-activity-ahead-of-final-fomc-decision/
