Forex Signals Brief December 13: Will Powell Hint on Rate Cuts?
Yesterday everyone was looking at the US CPI report, with the price action being slow in the first two sessions as traders feared a major deviation, which didn’t come. was choppy and indecisive, similar to non-farm payrolls on Friday. The data was basically in line with expectations and the price action was choppy, prompting the first reaction to be to sell the US dollar, which was reversed soon after. The details of the report were higher than expected, which sent US dollar to its highest level of the day as a result.
Gold continued lower as it fell below $1,980, while Oil plummeted further, closer to $68. This adds to the notion that inflation will be back on track in no time. The FED may respond to this at tomorrow’s meeting, but the market did not appear to be alarmed. After all, if headline inflation falls below 2%, can the Fed hold on from cutting them back coon?
Indices continued to push hgiher to new all-time highs. The improved sentiment aided risk currencies which turned out to be a drag on the USD later in the day. The bond auction was another event for financial markets, and everyone was waiting to see if there were issues again as last month. However, the auction went smoothly and we saw a small jump in bond yields.
Today’s Market Expectations
Today starts with the UK October GDP report, industrial output and construction output, all of which are expected to show a decline, which might weigh on the GBP. In the US session, we have the producer price index PPI report, which is expected to show an increase in November, but it won’t have much effect on the FED’s decision or the markets today.
Later in the evening, the big event which is the FOMC policy meeting, will likely shake markets, with both options being on the table. The FOMC is likely to maintain interest rates at 5.50% so the Dot Plot will be the focus of the market initially. The FED projected one more rate hike in 2023, followed by two rate decreases in 2024, in its September projections, but after the recent disinflationary trend and softening in general economic data, no one expects a hike today. On the other hand, traders don’t know what to expect, so we’ll see whether Powell will hint at the start of the rate cutting cycle.
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