Market Continues to Price in Aggressive Rate Cuts for 2024

Last year ended with clear feelings from the market's side about the direction of rates in 2024: rate cuts across the board, apart from the Bank of Japan. Two weeks into the new year and the market is trying to digest an already busy calendar. Inflation data from both the US and the euro area, and the US labour market have already made an impact on expectations. Therefore, what is currently priced in?

Canadian Inflation Likely Ticked Up in December But Easing Trend to Continue

December inflation numbers and the Bank of Canada’s own business and consumer surveys will headline a slew of Canadian indicators ahead of the central bank’s next interest rate decision later this month. Canadian headline CPI growth is expected to tick slightly higher (+3.4% year-over-year) from November’s 3.1% increase, but with the gain largely coming from energy price ‘base-effects’ as a large drop in gasoline prices a year ago falls out of the year-over-year growth calculation.

Weekly Economic & Financial Commentary

Inflation continues to cool. Although rising energy prices drove a hotter-than-expected change in the headline CPI, the core CPI was up 3.9% year-over-year in December, bringing the annual change below 4% for the first time in two and a half years. A soft PPI print in December provided additional evidence that price pressures are abating.

In a World Gone Bananas, Don't Squash the Other Fruit

Policy interest rates needed to increase from their pandemic lows, but there is a question of how far central banks really need to lean against apparently strong demand. What appears to be demand-driven could be a ripple effect from supply shocks affecting other products.

DPP Secures Presidency in Taiwanese Election

Taiwan election points to status quo: As expected, the independence-leaning DPP secured the presidency for the third time in a row as their candidate Lai Ching-te won by a 6.7 percentage points margin to KMT's Hou Yu-ih. However, Lai's victory was smaller than his predecessor Tsai Ing-wen and DPP lost the majority in the parliament. Hence Lai is ruling with a weaker mandate than Tsai Ing-wen

EUR/USD Blocked in Tight Sideways Range

On FX markets EUR/USD is blocked in a tight sideways range between 1.0875 & 1.10. EUR/GBP trading might become a bit more lively compared to last week, with UK labour market data (Tuesday), inflation data (Wednesday) and retail sales (Friday) scheduled for release.

Forex and Cryptocurrencies Forecast

We published our global forecast for EUR/USD for the upcoming year in the last week of 2023. Now, moving from long-term projections, we return to our traditional weekly reviews, which have been conducted by the NordFX analytical group for over a decade.

GBP/USD Eyes UK Wage Growth

The UK will release employment data on Tuesday and the spotlight will be on wage growth. Over the past few months, wages have been falling and the Bank of England would like to see that trend continue as wages have been driving inflation. Average earnings including bonuses dropped to 7.2% in the three months to September, down from 7.7% in the previous release. The market estimate stands at 6.8% for the three months to October.

Dollar Stalls, Turns to US Retail Sales for Direction

The US economy put in a stellar performance last year. Real economic growth remained around 3%, fueled by resilient consumer spending, a tight labor market, and an enormous government deficit.

Sunset Market Commentary

US markets are closed today for Martin “I have a dream” Luther King Day. That brought Europe at the center of attention today and that’s what we’ll do in this report as well. Our angle is German, as the country reported a first, very early estimate of growth in 2023. The Federal Statistic’s Office (Destatis) reported GDP to be -0.3% lower last year than in 2022.