Market watch: 20th December 2024

Brutal. Markets across the board suffered through a nasty correction following the latest Fed meeting. The decision itself was not unexpected – an interest rate cut from 4.75% to 4.5% was thoroughly priced in beforehand. The surprise came in the form of next year’s forecasts, which now predict fewer and slower rate cuts than had previously been assumed. The US Dollar shot up unilaterally, demolishing currencies pairs from America to Europe to Asia. The Euro smashed down to $1.035; Cable is down to $1.25; the Australian and New Zealand Dollars are hitting multi-year lows; the Korean Won is now matching prices from back in 2009. Greenback dominance pushed the DXY above 108 for the first time since 2022. Yesterday, the Bank of Japan and Bank of England both elected to forego any rate cuts of their own, as widely expected.

Of course, a surging Dollar comes at the expense of everything else. US stock markets fell precipitously on Thursday, the Dow falling 2.6%, the S&P 500 losing almost 3% and the Nasdaq Composite faring the worst of all with a 3.6% loss. Major indices in Europe did not escape unscathed either. Gold took a devastating blow, falling over $60 on Thursday to $2,585 an ounce. Bitcoin plummeted back below $100,000 following the meeting, taking the wider crypto market along with it. A rough day in the office to say the least.

The only real significant event remaining this week is the publication of the PCE price index later today. The figures have been known to influence the Fed decisions in the past, but the next FOMC meeting is not until the 29th of January. Next week has almost nothing to offer in terms of tradeable events either. Time to settle down for the year.