Spreadex Market Update
Wall Street bounces back as USD hits a 5-month low
The Big News
Despite a resilient US economy, GDP growth at 4.9% missed the anticipated 5.2% mark, stirring speculation about a potential Federal Reserve policy shift. Personal Consumption Expenditures (PCE) prices also declined more than expected, dropping by 20 basis points to 2.6%. This combination of lower growth and subdued inflation has fuelled optimism among investors, leading to a rebound in Wall Street stocks.
In Europe, ECB Vice President Luis de Guindos's comments suggesting it’s premature to discuss rate cuts bolstered the Euro, pushing the EURUSD pair back above 1.10. This strength comes amidst rising expectations that the Fed might lean towards rate cuts, enhancing risk appetite among investors. Technical analysis indicates that if the Euro sustains above this level, it could further rally, with support found at 1.0950.
The Bank of Japan faces a different scenario. With Japan's core inflation slowing to 2.5% in November, the central bank has more leeway to evaluate its exit strategy from ultra-loose monetary policy. However, given the country's fragile economic state, an exit delay is increasingly likely, a sentiment reflected in the USDJPY’s rise above 142.
Turkey's monetary policy took a new drastic turn with the Central Bank raising its rates to 42.5%, a move in line with expectations but still significant given the current economic climate. This aggressive stance is seen as a step towards achieving positive real rates, albeit at the risk of exacerbating the country's cost of living crisis. The USDTRY pair reacted by edging closer to the 30 mark, after briefly testing the 29 resistance level.
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