The U.S. dollar held near recent highs on Tuesday, as traders turned their focus to pivotal central bank meetings this week, with the Federal Reserve (Dec 18), Bank of Japan (Dec 19), and Bank of England (Dec 19) expected to take center stage.
Key Market Highlights
USD/JPY Near 154.50 as BOJ Rate Hike Bets Fade
The USD/JPY pair rose to 154.17, touching highs of 154.48 earlier in the session, as markets scaled back expectations for a BOJ rate hike on Thursday.
- Speculation suggests the BOJ may wait until January 2025 to assess global risks and next year’s wage negotiations before considering a move.
- Failure to signal a clear tightening path could push USD/JPY higher, testing resistance at 154.70–155.00.
Fed Poised for a 25 bps Rate Cut (Dec 18)
The Federal Reserve is widely expected to deliver a 25-basis-point cut at its meeting on Wednesday, with a 94% probability priced in.
- Despite robust economic data, including 3.3% Q4 GDP growth and resilient services activity, inflation uncertainty remains a concern for 2025.
- Traders now see just a 37% chance of one or no further cuts next year.
Bank of England (Dec 19): Sterling Recovers
Sterling climbed to $1.2684 after upbeat U.K. business activity data showed signs of rising prices.
- The BoE is expected to hold rates steady on Thursday, with markets watching closely for guidance on wage pressures and inflation.
Aussie and Kiwi Dollars Steady Amid China Stimulus Hopes
The AUD/USD traded at $0.6373, while the NZD/USD rose slightly to $0.5792.
- Weak Chinese economic data has weighed on sentiment, but markets remain hopeful for Chinese fiscal stimulus in 2024.
Bitcoin Hits Record High 📈
Bitcoin surged to a new all-time high of $107,821, buoyed by President-elect Donald Trump’s proposal for a U.S. Bitcoin Strategic Reserve. The crypto now trades near $106,000, with bulls eyeing $110,000 next.
Key Events This Week
📅 Dec 18 – Federal Reserve: A 25 bps cut is widely expected, with markets watching for clues about 2025 policy direction.
📅 Dec 19 – Bank of Japan: BOJ expected to hold rates steady, with January seen as the next window for action.
📅 Dec 19 – Bank of England: Rate hold likely, with focus on inflation and wage dynamics.
Technical Outlook
- USD/JPY: Bullish above 153.80, with resistance at 154.70–155.00. A break could signal further gains.
- EUR/USD: Trading near $1.0510, capped by U.S. dollar strength and widening yield differentials.
- GBP/USD: Holding near $1.2700, with a positive bias if U.K. wage data continues to impress.
Conclusion
The U.S. dollar remains firm as traders look to the Fed, BOJ, and BOE for clues on policy direction into 2025. The yen remains under pressure amid BOJ uncertainty, while Bitcoin continues to rally. With the Fed’s stance expected to set the tone, markets brace for a week of volatility.
