Macro-News round-up:

#MarketNews

  • Fed Indicates Rate Cuts in 2024: It appears as though the Fed Chair is raising alarms when he stands up and says he recognizes the risks they pose by maintaining rates too high for too long. Risk indicators have plummeted, and the US and German 2-year bonds have fallen to the lowest levels of the year. Recent data has not really validated the dramatic fall in yields. (the latest employment data came out even better than expected). The DXY dollar fell and the EURUSD rose again, exceeding 1.09.

    The so-called dot plot showed the median year-end 2024 projection for the federal funds rate fell to 4.6% from 5.1% seen in September. Policymakers said that recent indicators suggest that economic growth has slowed and job gains have moderated but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The central bank also published new projections. GDP growth is expected higher this year (2.6% vs 2.1% in the September projection), but slightly lower in 2024 (1.4% vs 1.5%).

  • Europe: Today we will have the ECB interest rate decision and then a speech by Christine Lagarde. A dovish monetary policy stance is also expected, even more justified given the recessionary situation in Europe, which is much worse than the economic situation in the US.

  • Switzerland Leaves Rates Steady as Expected. The Swiss National Bank kept its key policy rate unchanged at 1.75% for a second consecutive meeting in December 2023, in line with forecasts, saying inflationary pressure has decreased slightly. The Swiss franc strengthened after the words of the Fed, which lowered the dollar.

  • Industrial production growth in Japan was revised higher to 1.3% M/M in October 2023 from a flash reading of 1.0%, after a final 0.5% increase a month earlier, marking the second straight month of expansion in industrial output. This suggests that private investment will rebound in the coming quarters. As manufacturing orders advanced the most, the recent troughing in the semiconductor industry could be a reason for the solid outcome in October.

  • Australia: Compared to expectations, the November employment report was much stronger. The majority of the 61,500 rise in total employment came from a 57,000 increase in full-time work. Even if the unemployment rate increased in November from 3.8% to 3.9% (which was revised higher from 3.7% earlier), this still represents a very solid labor report and has to challenge the market’s unwavering belief that rates in Australia have peaked.

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