Global Markets Bracing for Impact
As the world waits with bated breath, central banks are set to make their moves, and the ripple effects are already being felt. The Bank of Japan’s decision to keep interest rates steady has cleared the way for a sell-off in the yen, which has plummeted to a one-month low against the US dollar.
Dollar Soars, Stocks Tumble
A cautious outlook from the Federal Reserve has sent shockwaves through the markets, causing stocks to tumble and the dollar to soar. Investors are now forced to confront the risks associated with an unpredictable US administration, as President-elect Donald Trump prepares to take office.
Sterling on High Alert
Meanwhile, all eyes are on the Bank of England, which is expected to make its decision later in the day. Despite being supported by relatively hawkish market expectations, sterling may still be in for a rough ride. With UK wages data showing signs of strength, markets are predicting rates to stay on hold at 0.75%. However, if policymakers take a particularly hawkish tone, this could all change.
Fed’s Signal Sends Shockwaves
The Federal Reserve’s decision to cut interest rates by a quarter of a percentage point has had far-reaching consequences. By signalling a slower pace of easing ahead, Fed officials have raised their median projection of the long-run neutral rate and significantly increased their 2025 inflation outlook. This has led to a surge in the dollar, pushing South Korea’s won to a 15-year low, and causing stocks to fall.
Recession Fears in New Zealand
New Zealand’s economy has slipped into recession in the third quarter, bolstering the case for more aggressive rate cuts. As a result, the kiwi has fallen to a two-year low. This news comes as central banks in Norway and Sweden prepare to make their own decisions.
Norway and Sweden Take Center Stage
Norway’s central bank is expected to keep interest rates at their highest level since 2008, supported by economic growth, above-target inflation, and a weak local currency. In contrast, Sweden’s central bank is likely to cut its key rate by a quarter point, with further policy easing on the horizon if inflation remains under control.
Key Developments to Watch
Thursday promises to be a pivotal day in global markets, with central bank decisions in Britain, Norway, and Sweden set to make their mark. Will sterling be ruffled by the Bank of England’s decision? How will the dollar respond to the Fed’s signal? One thing is certain – investors will be watching with bated breath.
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