Daily Analysis 19/12/2024

• GBP/USD Price: Following a decline of over 1% after the Federal Reserve’s hawkish 25 bps rate cut, GBP/USD finds stability, trading around 1.2600 during Thursday’s European session. The pair’s recovery highlights reduced market panic as traders reassess the implications of the Fed's decision.
• Fed Rate Cut: The Federal Reserve cut its benchmark rate to 4.25%-4.50%, the lowest level in two years, but maintained a cautious tone in its projections.
• Fed Dot Plot: The updated dot-plot suggested only two rate cuts in 2025, reducing expectations of a quicker easing cycle and boosting USD strength.
• UK Inflation: UK CPI data revealed a 2.6% year-over-year rise in November, accelerating from October’s 2.3% growth. While the data indicates some inflationary pressures, it remains below the Bank of England’s comfort zone, leaving room for further policy adjustments.
• US Data: GBP/USD traders are closely monitoring key US data, including Initial Jobless Claims, Existing Home Sales, and the final Q3 GDP Annualized figures, scheduled for Thursday. Positive surprises in these figures could further strengthen the US Dollar and weigh on the GBP/USD pair.

Closing statement: GBP/USD faces near-term resistance as diverging monetary policies between the Fed and BoE weigh on the pair. The trajectory will depend on upcoming US data and UK economic indicators, which could provide fresh trading cues.

• Gold Price: Gold price (XAU/USD) trades slightly above the $2,600 mark on Thursday, maintaining a 0.40% intraday gain during the European session. Despite trimming earlier recovery gains, gold remains supported by cautious investor sentiment following recent Fed announcements.
• Fed Rate Cut: The Federal Reserve reduced its benchmark rate for the third time since September but signaled a slower pace of rate cuts moving forward.
• Updated Dot Plot: The updated dot plot suggests the fed funds rate will fall to 3.9% by 2025, indicating two more 25 bps cuts, which helped anchor gold’s recent stability.
• Powell Highlights: During his press conference, Fed Chair Jerome Powell noted significant easing in inflation over the past two years. However, inflation remains slightly above the Fed's 2% target, signaling that monetary tightening may not yet be completely off the table, which could cap further gold gains.
• US PCE Data: The US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, is scheduled for release on Friday. Market participants expect the PCE data to influence both USD dynamics and XAU/USD price movements in the near term.

Closing statement: XAU/USD remains resilient amid mixed macroeconomic signals but faces challenges in breaking out of its current range. The next significant driver will be Friday’s PCE data, which could either reinforce gold’s safe-haven appeal or pressure it lower depending on inflation trends.

• WTI Price: West Texas Intermediate (WTI), the US crude oil benchmark, trades around $69.60 on Thursday.
• Fed Decision: Crude prices remain under pressure as markets digest the Federal Reserve's third consecutive 25-basis-point rate cut, signaling a cautious stance on further monetary easing in 2025.
• US Crude Inventories: Support for WTI comes from a modest drawdown in US crude inventories. The Energy Information Administration (EIA) reported a 934,000-barrel decline for the week ending December 13, reflecting a slight tightening in supply that may help limit further losses in oil prices.
• Kazakhstan Plans: Kazakhstan’s Prime Minister Olzhas Bektenov announced efforts to intensify natural gas and oil production, adding bearish pressure to crude prices. Increased output from Kazakhstan could further weigh on the global oil market, which already anticipates a well-supplied scenario in 2025.
• China’s Retail Sales: Chinese retail sales data for November fell short of expectations, raising concerns about weakening consumer demand in the world's largest oil importer. This exacerbates worries about a slower-than-expected recovery in China's economic activity and its implications for global oil demand.

Closing statement: Crude oil prices are likely to remain range-bound near-term, with support from declining US inventories offset by bearish news from Kazakhstan and concerns over Chinese demand. The market awaits further clarity on macroeconomic trends and global energy dynamics to establish a clearer directional bias.

• DAX Price: The DAX slipped by 0.02% on Wednesday, following Tuesday’s 0.33% decline, to close at 20,246. The index extended its losing streak to four sessions as investors exercised caution ahead of the Federal Reserve's interest rate decision and economic projections.
• Eurozone Inflation: Eurozone’s annual inflation rate for November was revised down from a preliminary 2.3% to 2.2%, compared to 2.0% in October. Although still above the European Central Bank’s (ECB) 2% target, the lower figure eased concerns about persistent inflationary pressures.
• German Consumer Confidence: German consumer confidence showed modest improvement heading into January 2025. The GfK Consumer Climate Indicator rose from -23.3 for December to -21.3 for January, reflecting a slightly better sentiment among German households despite ongoing economic challenges.
• Fed’s Rate Cut: The Federal Reserve’s widely anticipated 25-basis-point rate cut on Wednesday signaled a cautious approach to monetary easing in 2025. The FOMC projections indicated fewer rate cuts next year, which could affect global equity markets, including the DAX.
• US Labor Market Data: Investors now turn their attention to the US labor market, with initial jobless claims expected to decline from 242,000 to 230,000 for the week ending December 14. Positive US labor data could weigh on global equities, including the DAX, by boosting the US Dollar and tightening financial conditions.

Closing statement: The DAX remains under pressure amid global economic uncertainty and cautious investor sentiment. Improved German consumer confidence and easing Eurozone inflation provide some support, but concerns over the Fed's cautious monetary stance and upcoming US labor data are likely to dictate near-term market direction.