USDJPY weakens as BoJ to meet
The Japanese yen clawed back some losses as traders digested rumours of an end to negative rates. The currency soared on speculation that the BoJ was considering several options to lift interest rates out of the negative area. The question is how long market participants can maintain their enthusiasm. Feeble wage growth is reportedly holding policymakers back to drop their ultra-loose monetary policy. Still, the market has high hopes that the BOJ will pivot next year and Governor Ueda will have the challenging task of balancing expectations at the upcoming meeting. 146.50 is a key resistance and 138.50 the closest support.
USDCAD consolidates on BoC easing hopes
The Canadian dollar may struggle as traders price in monetary policy easing for early next year. The market widely expects the Bank of Canada to follow the ‘first in, first out’ pattern in the global tightening cycle, leading the way with the first rate cuts by as soon as April. A softer CPI reading this week would reinforce this view and pull the loonie lower. However, a surprise uptick may catch traders wrong-footed. Meanwhile, weakness in the price of oil, Canada’s major export, could remain a strong headwind amid sticky inflation and a cloudy demand outlook. 1.3270 is the greenback’s major support and 1.3620 the first hurdle.
XAUUSD bounces over end of US tightening
Gold bounced back as the US Federal Reserve signalled possible rate cuts next year. The central bank has seemingly confirmed the end to its interest rate hike cycle and the next natural step for the market would be monetary easing to avoid a rate overdose. Policymakers’ acknowledgement of an inflationary downtrend has boosted such expectations, which put pressure on bond yields and the US dollar. Lower opportunity cost for bullion means that the metal may enjoy a sustained rally as the dollar turns south at the end of the quantitative tightening era. The recent peak of 2145 is the next target and 1930 the first support.
NAS 100 hits 2-year high on dovish Fed
The Nasdaq 100 advances in the wake of a dovish pivot by the Fed. The recent rally might be a pat on the Fed’s back for pressing inflation back to normal without causing a disruption in the labour market and provoking a recession. Fed Chair Jerome Powell has stressed on “not keeping rates too high for too long” which can be seen as giving the market the green light to go risk-on. With a near unanimity on seeing lower borrowing costs in 2024, policymakers seem to be giving in to what the market has been wagering over the past couple of months. 16700 from the end of 2021 is a major hurdle and 15500 a fresh support.
