Key Takeaways:
- 💵 US Dollar rose in thin holiday-impacted trade, retaining strength ahead of possible fewer Federal Reserve rate cuts in 2025
- 📈 Markets expect just about 35 basis points of easing for the US in 2025, driving US Treasury yields higher
- 📉 EUR/USD fell to near a two-year low as the European Central Bank is expected to cut interest rates more rapidly than the US
- 🇬🇧 GBP/USD traded flat as Britain’s economy failed to grow in the third quarter, with Bank of England policymakers split on interest rate decisions
- 🇯🇵 USD/JPY fell after the Bank of Japan signalled a wait-and-see approach to interest rate hikes
- 🇨🇳 USD/CNY edged higher as Beijing plans to ramp up fiscal spending in 2025.
Market Insights:
The US Dollar demonstrated strength in the market, buoyed by expectations of fewer Federal Reserve rate cuts in 2025. This outlook prompted markets to anticipate only a modest easing of about 35 basis points for the US, which in turn led to an increase in US Treasury yields.
On the other hand, the Euro struggled against the Dollar, falling close to a two-year low. This decline was attributed to speculations that the European Central Bank would implement interest rate cuts at a faster pace compared to the US.
Meanwhile, the GBP/USD pair remained flat as the UK economy showed no growth in the third quarter. Additionally, uncertainty loomed as Bank of England policymakers were divided on their decisions regarding interest rates.
In Asia, the USD/JPY pair experienced a decline after the Bank of Japan indicated a cautious approach towards interest rate hikes. Conversely, the USD/CNY pair edged higher as Beijing announced intentions to increase fiscal spending in the upcoming year.