Amid a broader trend of a weakening dollar, market movements are gradually converging as Christmas approaches. Following significant events like last week’s monetary policy announcements by the U.S., U.K., and European central banks and this week’s Bank of Japan (BoJ) monetary policy meeting, the pressure to sell the dollar remains strong. Yesterday’s lower-than-expected U.K. inflation data led to a significant drop in U.K. bond yields, which in turn affected U.S. and German bond yields. The market is seemingly incorporating the expectation of rate cuts by major countries next year as a given. While the timing of these rate cuts may shift depending on data, a consensus is forming that the rate hikes by major central banks have peaked unless shockingly new information emerges.
Regarding the BoJ, speculation continues about normalization moves like ending negative interest rates or withdrawing from Yield Curve Control (YCC). However, BoJ Governor Ueda has consistently stated that next spring’s labor negotiations will be key, suggesting that the current easing measures are likely to continue until then. Japan’s Finance Minister Kanda recently noted the current weaker dollar trend due to the increasing expectations of U.S. rate cuts, without specifically mentioning Japan’s inflation trends or speculation related to the BoJ.
Looking at the dollar index, the weakening trend since November is still in play. However, there has been daily volatility since late last week, and a further downward movement seems to have paused. The market appears to be waiting for movements post-Christmas, with upper resistance levels in mind.
Upcoming economic indicators in the overseas markets include Canadian Retail Sales (October), U.S. Real GDP (final value) for Q3, U.S. Initial Jobless Claims (Dec 10-16), U.S. Philadelphia Fed Business Outlook (December), and the U.S. Leading Economic Index (November).
My GBPAUD sell position from yesterday has already been stopped out, and I am currently in a no-position state. With the exception of cryptocurrencies, liquidity has significantly decreased, and the market has become unstable. Therefore, I plan to primarily avoid trading for the time being.
