December 17, 2024
Global financial markets are awaiting the US Federal Reserve's final interest rate decision for this year, scheduled to be announced tomorrow evening, Wednesday, amid widespread expectations that the central bank will cut interest rates for the third time in 2024.
Meanwhile, various financial markets witnessed several developments that affected the movements of commodities, currencies and stocks. The most prominent of these movements can be explained as follows: First: Global stocks
Risk sentiment has weakened and weighed on European and US stocks, with recession looming as monetary policy remains tight for now, despite the recent rate cut, but it seems it is not enough to save major economies.
In this regard, data from the Ifo Institute released this morning revealed a deterioration in the business climate in Germany, recording 84.7 points, while markets expected the index to grow to 85.5 points in December, reflecting the damage to the largest economies in the eurozone and, consequently, economic growth in the region as a whole.
On the other hand, US stocks were damaged by the contraction of US industrial production by 0.1% last November, continuing its contraction for the second consecutive month after the index contracted by 0.3% in October.
Also, US stocks found pressure on the back of declining market expectations regarding US interest rate cuts for the coming year; markets are now pricing in a total of 50 basis points of cuts, including the potential cut in tomorrow’s interest rate decision. Second: The main foreign exchange market
The US dollar witnessed clear stability in the major currency market transactions today, with anticipation of the US Federal Reserve’s decision tomorrow evening, which may include the Federal Open Market Committee’s directives regarding the interest rate path, which is likely to strongly affect the dollar’s performance against other currencies.
Perhaps the most notable moves in major currencies today were in the pound and the euro, with the pound reacting to strong UK labour market data showing wage growth – one of the country’s biggest drivers of inflation – accelerating again, meaning the Bank of England may have to slow the pace of monetary policy easing and keep policy at restrictive levels to ensure inflation remains low.
At the same time, the euro fell sharply against the US dollar, affected by negative business climate data in Germany, which reinforced market concerns about the performance of European economies; also, the chances of the European Central Bank continuing its interest rate cutting cycle at an accelerated pace and completely abandoning the tight levels increased. Third: Prominent commodities
Gold prices fell sharply on the back of rising US Treasury yields, which increased the opportunity cost of gold, in addition to the significant decline in expectations of US interest rate cuts next year.
Meanwhile, oil prices fell to their lowest level in a week, as concerns over oil demand grew on the back of negative news from Germany and China. A deterioration in the business climate in Germany, along with lower-than-expected growth in Chinese retail sales, raised investor concerns about the future of demand for crude oil.