Banche centrali

Markets today grappling with 3 uncertainties

The markets are about to close an eventful week, with central banks the absolute protagonists of the global economic and financial scene.
Share enthusiasm for the forecast of at least 3 rate cuts by the Fed during 2024 could be dampened today by the more cautious approach shown yesterday by the ECB and the Bank of England.
Both central banks left the cost of money unchanged, but with no hint of rate cuts next year.
In this context, the Eurotower is set to have a more hawkish monetary policy than the Fed.
The Asian session is about to end with the Chinese indices in the red, but with the Hang Seng in Hong Kong rising sharply in the wake of an accommodative Federal Reserve.
Overnight in the United States, the Dow Jones Industrial Average extended its record-breaking rally to new all-time highs, gaining 0.43%.
Other major indexes also continued to rise, with the S&P 500 rising 0.26% and the Nasdaq Composite rising 0.19%.
The balance of the week that is coming to an end, however, shows that the markets remain trapped in at least 3 reasons for uncertainty about the near future.
1.
Interest rates, there will be no cuts in Europe European central bankers are in no hurry to join the US turn towards interest rate cuts, even if investors continue to bet that the ECB and BoE will also soon convert to a accommodating policy.
After Federal Reserve Chair Jerome Powell signaled a potential reduction in borrowing costs in 2024, colleagues from Frankfurt to London said a further slowdown in inflation could not be taken for granted.
Whatever the bets of the financial markets, they have signaled that rate cuts are not on the agenda for now.
read also ECB meeting today, rates stuck at 4.5%.
The PEPP will be closed at the end of 2024 In detail, the European Central Bank said that the easing of monetary policy was not even mentioned in its December meeting and the Bank of England said that rates will remain high for a “long period ”.
The Norwegian central bank even increased rates.
2.
US dollar, how long will the weakness last? The euro jumped 1.1% overnight and the pound rose 1.2% before holding broadly steady in the Asian session.
That helped put pressure on an already fragile U.S.
dollar, which fell 1.9% on the week and settled near a four-month low at 101.97 against its major rivals.
The dollar will surprise by getting stronger next year as the U.S.
economy outperforms, according to some of the world's biggest money managers.
Fidelity International, JPMorgan Chase & Co.
and HSBC Holdings Plc.
they have an opposite view compared to the majority of analysts.
According to them, in fact, dollar strength will return to dominate the Forex in 2024.
These opinions contrast with the idea that lower interest rates, as signaled by the Federal Reserve on Wednesday, will weaken the greenback.
read also US dollar collapses on Fed data.
Is the greenback rally over? 3.
China, the recovery is still not convincing China's economic recovery remains uncertain.
Industrial production beat expectations, but retail sales fell short of forecasts.
Pressure is intensifying on Beijing to adopt policies to support growth.
A persistent real estate crisis and signs of disinflation are among China's most pressing challenges, with the Government targeted to step up measures to support the economy.
The Chinese central bank stepped up liquidity injections, but kept the interest rate unchanged on the renewal of maturing medium-term political loans.
read also Prices too low: China's latest problem is called deflation Reuters, citing sources, reported that Chinese leaders have agreed on a budget deficit equal to 3% of gross domestic product in 2024, down from the target of 3.8% for this year, suggesting Beijing wants to maintain fiscal discipline.

Author: A.W.M.

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