European Central Bank (ECB) to Cut, But by How Much?

Central Bank

Economic

Summary:

Both the markets and economists are universal in their agreement that the European Central Bank (ECB) will cut rates. But there seems to be an open debate among ECB officials themselves over how much it should be. In either case, the market is projecting a dovish tilt to the upcoming meeting, which ironically creates the conditions for a rebound.

The EURUSD had been trending downward for two months in the late summer and fall. But then came the latest GDP numbers, where Europe accelerated and the US slowed down. Since then, the currency pair has managed to rebound a bit, and talk of parity has become a lot quieter. The move, however, suggests that economic growth more than inflation is driving the price of the currency. Which has some important implications for how the market reacts to what the shared central bank does.

What Are the Forecasts

Nearly all economists in the latest survey agreed with a prediction that the ECB will cut by 25 bps at the conclusion of its meeting on Thursday. The tiny number of dissenters are in favor of a 50 bps cut. The markets are slightly more dovish, pricing in a 90% chance of a quarter-point cut; and a 10% chance of a half-point cut.

What this means is there is room for a move in the currency no matter what the ECB decides. Even in the most likely scenario, that Lagarde & Co go for the 25-pointer, then the markets will likely reprice that 10% dovish chance, giving the currency a bit of a boost. On the other hand, if the ECB does go through with the half-pointer that many in the “southern” countries are asking for (lead by France’s Villeroy), then the market will have a bigger move downward to reprice the 90% prediction that didn’t turn out.

It’s Also About the Future

Markets are overall expecting the European Central Bank (ECB) to be quite dovish, despite the recent uptick in inflation. That’s because consumer prices are expected to pop back up for a bit around the end of the year, and then go back down to target in early 2025. The thought is the ECB, facing a near-stagnant economy, won’t want to wait that long to ease. That means that the 25-bps option is expected to come along with a statement and a press conference leaving the door wide open to more easing at the next meeting. If that doesn’t happen, then the market could react as if the central bank in Europe became more hawkish.

There is a strong perception of future easing. Economists forecast 100 bps of cuts next year. Markets are even more dovish, pricing in 150 bps by the end of next year. That makes it more likely for the central bank to surprise to the upside than the downside, giving the Euro an upside risk. However, the bump might fade quickly as easing bias remains strong.

The Effects of the Context

Analysts seem to think that the ECB will likely ignore the political turmoil in Europe and the potential of tariffs next year when Trump takes over the White House again. But, that is likely to come up in the press conference. And the political uncertainty can’t be completely ignored, as the risk premium has driven up bond prices, affecting the currency.

With markets seeming to think that the ECB is now prioritizing economic growth over the last bit of high inflation, the focus could turn to the central bank’s economic projections. The ECB spent decades fighting a slow growth, slow inflation scenario, and it’s understandable that it would like to avoid returning to that. Markets might seize on whether or not the ECB expects the economy to pick up earlier next year or not in order to price in the chances of future easing.

Source:Orbex

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Justin

Economic

Forex

NZD/USD breaks its two days of losses after reaching a two-year low at 0.5761 on Wednesday, currently trading around 0.5820 during the early European hours on Thursday. However, the New Zealand Dollar (NZD) remains under pressure due to reports that Beijing may allow the Yuan to depreciate further next year to offset the impact of US tariffs. A weaker Yuan often negatively affects the NZD, considering New Zealand's heavy reliance on China as a key export market.

Additionally, market participants are anticipating a significant 50 basis point (bps) interest rate cut by the Reserve Bank of New Zealand (RBNZ) in its February meeting, which is contributing to the weakening of the New Zealand Dollar (NZD).

The upside of the NZD/USD pair comes as the US Dollar (USD) corrects downwards after breaking its four-day winning streak despite higher US Treasury yields. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 106.40 with 2-year and 10-year yields on US Treasury bonds standing at 4.16% and 4.28%, respectively, at the time of writing.

The US Dollar encounters headwinds as the latest US CPI report appears insufficient to dissuade the Federal Reserve (Fed) from reducing interest rates in December. According to the CME FedWatch Tool, there is nearly a 99% probability of a 25 basis point rate cut on December 18. Traders now turn their attention to the US November Producer Price Index (PPI), set for release on Thursday, for new market catalysts.

Source: FXSTREET

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Justin

Economic

Forex

The EUR/JPY cross trades in positive territory for the fourth consecutive day around 160.35 during the early European session on Thursday. The Japanese Yen (JPY) weakens after Reuters reported on Thursday that the Bank of Japan (BoJ) is considering keeping interest rates steady at its December meeting next week. A source said, “Policymakers prefer to spend more time scrutinising overseas risks and clues on next year's wage outlook.” Later on Thursday, investors will closely monitor the European Central Bank (ECB) interest rate decision.

Technically, EUR/JPY resumes its uptrend on the 4-hour chart as the price crosses above the key 100-period Exponential Moving Average (EMA). The upward momentum is supported by the Relative Strength Index (RSI), which stands above the midline near 59.45, supporting the buyers in the near term.

The first upside barrier for the cross emerges at 160.70, the high of December 11. Sustained trading above this level could pave the way to 161.10, the upper boundary of the ascending trend channel. The next potential resistance level is seen at 162.00, representing the high of November 26 and the round figure.

On the other hand, a breach of the 160.00 psychological level could drag the cross lower to 159.10, the lower limit of the trend channel. Any follow-through selling below the mentioned level could see a drop to 158.65, the low of December 11.

Source: FXSTREET

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Justin

Commodity

Silver (XAG/USD) trades with a positive bias above the $32.00 mark during the Asian session on Thursday and remains close to over a one-month high touched earlier this week. Moreover, the technical setup suggests that the path of least resistance for the white metal remains to the upside.

This week's sustained move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bullish traders. Moreover, the recent move-up witnessed over the past two weeks or so has been along an upward-sloping channel. Apart from this, positive technical indicators on daily/hourly charts validate the near-term positive outlook for the XAU/USD and support prospects for additional gains.

Hence, a subsequent move up towards retesting the monthly swing high, around the $32.55-$32.60 area, which now coincides with the top boundary of the aforementioned channel, looks like a distinct possibility. Some follow-through buying will confirm a fresh breakout and lift the XAG/USD to the next relevant hurdle near the $32.80-$32.85 region en route to the $33.00 round figure mark and the $33.20-$33.25 horizontal resistance.

On the flip side, weakness below the $32.00-$31.90 area now seems to find some support near the $31.60 horizontal zone ahead of the $31.45-$31.40 confluence. The latter comprises the 200-period SMA on the 4-hour chart and the ascending channel support, which if broken decisively might prompt aggressive selling and shift the bias in favor of bearish traders. The XAG/USD might then drop to sub-$31.00 levels en route to mid-$30.00s.

Source: FXSTREET

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FastBull Featured

Daily News

Economic

[Quick Facts]

1. German Chancellor to submit parliament request to hold confidence vote.

2. U.S. senator John Thune says failure is not an option on tax policy.

3. France to set out emergency law to avert government shutdown.

4. Bank of Canada cut interest rates by 50 basis points.

5. U.S. November CPI opens door for a December rate cut.

[News Details]

German Chancellor to submit parliament request to hold confidence vote

German Chancellor Olaf Scholz on December 11 submitted a formal request for a vote of confidence in the Bundestag, the country's lower house of parliament. The vote is expected to take place on December 16. The Bundestag has a total of 733 members. To obtain the confidence of the parliament, Scholz needs more than 367 votes to secure parliamentary confidence and continue governing. However, as of now, only the Social Democratic Party (SPD) parliamentary group, with 207 members, has expressed support for the chancellor. The Green Party, a coalition partner with 117 members, is expected to abstain from the vote, while the largest opposition party, the Christian Democratic Union (CDU), will not back Scholz. German media widely predict that, barring any surprises, Scholz is unlikely to pass the confidence vote.

U.S. senator John Thune says failure is not an option on tax policy

Incoming U.S. Senate Majority Leader John Thune expressed his hope to introduce a comprehensive tax policy plan before the summer but acknowledged that reaching a consensus on revising the complex tax code would take time. Thune noted that failure is not an option regarding the tax policy. According to him, the challenging issues facing the tax reform bill include determining the baseline to use, whether to make tax cuts permanent and how much should be offset. While negotiations over the complex tax policies are still ongoing, Thune's "two-step" approach differs from the single-step strategy favored by House Ways and Means Committee Chairman Jason Smith. "If we don't act swiftly, we risk being stuck in a quagmire," Smith remarked on Tuesday.

France to set out emergency law to avert government shutdown

French caretaker government spokesperson Maud Bregeon stated on Dec. 11 that the caretaker cabinet meeting held that day proposed a "special law" draft for the 2025 fiscal budget to prevent a government shutdown due to funding issues. The draft will be submitted to Parliament for review next week. Bregeon said the meeting, chaired by President Emmanuel Macron, introduced the "special law" draft to ensure the government can continue functioning in the absence of a finalized 2025 fiscal budget.

Bank of Canada cut interest rates by 50 basis points

The Bank of Canada lowered its benchmark interest rate by 50 basis points to 3.25%, marking the second consecutive month of a 50-basis-point rate cut, in line with market expectations. This brings the total rate cuts by the Bank of Canada this year to five, amounting to a cumulative reduction of 175 basis points, making it one of the most aggressive central banks among major economies in easing monetary policy.

However, the central bank also hinted that after the substantial rate cuts expected by the market and most economists, smaller rate reductions might occur in 2025, signaling a slowdown in the pace of monetary easing.

The policy statement indicated that the Canadian economy is primarily weighed down by business investment, inventories, and exports. Year-on-year growth in the third quarter was 1%, slightly below the central bank's forecast, and the preliminary forecast for fourth-quarter growth is also expected to fall short of expectations. Meanwhile, lower interest rates have started to translate into increased household spending, but the economy remains in a state of excess supply. The unemployment rate continues to rise as employment growth lags behind labor force growth.

Governor Tiff Macklem stated at a press conference that the incoming U.S. administration under President-elect Donald Trump may impose tariffs on Canadian exports, calling this "a new major uncertainty." He emphasized that the Bank of Canada would assess the necessity of further rate cuts on a case-by-case basis and noted that monetary policy no longer needs to be clearly restrictive.

Although Canadian policymakers expect inflation to hover near the 2% target in the coming years, reduced immigration targets, a two-month tax break, and potential tariffs could alter the growth and inflation outlook in the coming months.

Monetary policy has successfully brought the inflation rate back to the 2% target, and the current policy focus is on keeping inflation near this level. The Bank of Canada will continuously evaluate the necessity of further rate cuts. The central bank aims to see an economic rebound and to maintain inflation at around 2%. If the economy develops broadly as expected, the Bank of Canada's monetary policy will adopt a "more gradual" approach.

U.S. November CPI opens door for a December rate cut

The U.S. Bureau of Labor Statistics released data on December 11 showing that the U.S. Consumer Price Index (CPI) in November rose 2.7% year-on-year and 0.3% month-on-month, both in line with expectations. The core CPI increased by 3.3% year-on-year and 0.3% month-on-month, both in line with expectations.

The rebound in core goods prices was the primary driver of this data, with the 0.3% month-on-month growth rate reaching its highest level since May 2023. However, part of this could be attributed to short-term disruptions, such as extreme weather. Following Hurricane Milton's impact in October, which caused significant damage to homes and vehicles, replacement demand may have driven purchases. New car prices rebounded from flat growth in the previous month to a 0.7% month-on-month increase, while new truck prices rose from flat growth to 0.5%. Used car prices, although slowing from a 2.7% month-on-month increase in October to 2.0%, remained elevated. In addition to weather-related disruptions, another potential factor could be linked to the November elections. After Trump's victory and with the holiday promotion season approaching, concerns about potential tariff increases may have prompted consumers and businesses to accelerate purchases of big-ticket items like vehicles and appliances.

Rental price growth slowed to 0.2% in November, the lowest since 2021, alleviating concerns about rising inflation. Notably, with the Thanksgiving holiday in November, hotel prices surged from 0.5% growth in the previous month to 3.7%. Excluding the rebound in hotel prices, growth in other rental categories slowed more significantly. The seasonally adjusted month-on-month growth of primary residence rents dropped from 0.3% to 0.2%, while owner-equivalent rent growth declined from 0.4% to 0.2%. Given that rental costs account for over one-third of the CPI weighting, the slowdown in rental inflation is undoubtedly a positive sign for curbing core CPI.

Overall, this data essentially opens the door for a December rate cut. Following the data release, the CME's "FedWatch" tool indicated that the probability of a 25-basis-point rate cut by the Federal Reserve in December has surpassed 85%. Inflation's stickiness may prompt the Fed to reduce its guidance for rate cuts in 2025 within its dot plot because the U.S. growth and inflation trajectory in 2025 could be influenced by various factors, including the implementation of Trump's policies and global economic conditions. The Fed may be increasingly dependent on data.

[Today's Focus]

UTC+8 16:30 Swiss National Bank December Interest Rate Decision

UTC+8 17:00 Swiss National Bank Chairman's Press Conference

UTC+8 17:00 IEA's Monthly Crude Oil Market Report

UTC+8 21:15 European Central Bank December Interest Rate Decision

UTC+8 21:30 U.S. PPI MoM (Dec)

UTC+8 21:45 ECB President Lagarde's Press Conference

To stay updated on all economic events of today, please check out our Economic calendar

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Glendon

Economic

The world of trading is often as much about mental resilience and psychological fortitude as it is about technical strategies. Behind every successful trader lies an unshakable mindset, and what better way to nurture that mindset than through the wisdom of those who have already walked the path? Whether you're just starting out or have been trading for years, there are quotes that offer profound insights into market psychology, risk management, and success.

In this article, we’ve curated some of the most inspiring finance quotes that can help fuel your trading journey, offering not only motivation but also valuable lessons for navigating the ever-changing markets.

1. “The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Philip Fisher

This timeless quote by Philip Fisher is a reminder for traders to distinguish between price and value. While markets are often driven by short-term price movements and volatility, successful traders recognize that understanding the true value of an asset—whether it's a stock, commodity, or cryptocurrency—lies in the long-term potential, not fleeting market trends. Traders should focus on value investing principles and avoid getting swept up in hype or panic.

2. “In investing, what is comfortable is rarely profitable.” – Robert Arnott

Comfort is the enemy of growth, especially in the unpredictable world of trading. Robert Arnott’s words speak to the inherent risk involved in trading and investing. To succeed in this field, traders need to push beyond their comfort zones, take calculated risks, and embrace uncertainty. Traders who avoid risk may miss out on substantial rewards. The key is to manage that risk intelligently—through diversification, stop-loss orders, and risk-to-reward ratio analysis.

3. “Risk comes from not knowing what you’re doing.” – Warren Buffett

Arguably one of the most famous investors of all time, Warren Buffett’s quote underscores the importance of knowledge in trading. No matter how sophisticated or advanced a trader’s strategies are, the fundamental pillar of success is education. Learning about market trends, company fundamentals, technical analysis, and risk management are all vital components to becoming a successful trader. The more you know, the more confident you will be in navigating turbulent markets.

4. “The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder

Alexander Elder, a renowned trading psychologist, emphasizes that trading is not about chasing profits, but about making the best decisions. Traders who prioritize making intelligent, well-thought-out trades will ultimately see their accounts grow. Focusing solely on the money can lead to impulsive decisions and risky behavior. The key is developing a disciplined mindset, adhering to a strategy, and sticking with it—regardless of short-term fluctuations.

5. “The four most dangerous words in investing are: This time it’s different.” – Sir John Templeton

This quote from Sir John Templeton warns against the dangerous fallacy of thinking that the rules of the market have changed. Whether it's a market crash or an economic boom, history has shown us that the fundamentals of market behavior remain constant. It’s easy to get caught up in the excitement of new trends or technologies, but successful traders know that staying grounded in proven principles of market analysis and risk management is what leads to long-term success.

6. “Do not be embarrassed by your failures, learn from them and start again.” – Richard Branson

No one is immune to failure, not even the most successful traders. What separates successful traders from the rest is their ability to learn from mistakes and adapt. Richard Branson’s advice reminds us that failure is an opportunity to grow. Whether you experience a losing streak or a setback in your trading strategy, don’t let it define you. Use it as a stepping stone to refine your approach and become even better.

7. “The market is a device for transferring money from the impatient to the patient.” – Warren Buffett

Warren Buffett’s famous quote highlights one of the most important psychological aspects of trading: patience. It can be tempting to act impulsively, especially in the face of volatility, but those who can maintain a long-term perspective often come out ahead. A patient trader understands that wealth accumulation in the markets often requires a steady hand and the ability to ride out short-term noise for long-term gains.

8. “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros

Risk management is the cornerstone of any successful trading strategy. George Soros’ quote brings attention to the concept of asymmetry—how much you gain when you’re right should far outweigh how much you lose when you’re wrong. By maintaining a solid risk-to-reward ratio, traders can minimize losses and capitalize on profitable trades.

9. “The best traders have no ego.” – Mark Cook

Ego can be a trader’s worst enemy. Mark Cook’s insight reminds us that successful traders aren’t driven by pride, but by the need to make informed, rational decisions. A trader with a big ego might refuse to admit when they're wrong, stubbornly sticking to a losing position. The best traders are those who can detach from their emotions, admit mistakes, and adjust their strategies accordingly.

Conclusion: How to Use These Quotes in Your Trading

These quotes aren’t just words to read; they should be tools to shape your trading philosophy. Use them as a mental framework to guide your decisions, reflect on your trading behavior, and motivate you to improve. Trading isn’t easy, and even the best traders face challenges. But with the right mindset, strategy, and perseverance, you can navigate the ups and downs of the markets with confidence.

Start by identifying the quotes that resonate with you most, then integrate their wisdom into your daily trading routine. Whether it's honing your risk management strategy, focusing on the long term, or learning from failures, these powerful words will serve as reminders that success in trading is as much about mental discipline as it is about strategy.

Remember, in trading, as in life, the right mindset is often the difference between failure and success. Keep these quotes in mind, and let them inspire you to become a better trader every day.

To stay updated on all economic events of today, please check out our Economic calendar

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ING

Commodity

Economic

We came into 2024 with a cautiously optimistic view on the commodities complex, and looking at the complex as a whole we think this has turned out to be the right view. The S&P GSCI index is basically flat on the year. There are some commodities that have performed well this year as central banks have embarked on their easing cycle. It's for this reason – along with the geopolitical environment – that precious metals have been the best performing part of the complex, with gold hitting record levels repeatedly this year. Industrial metals started the year on a strong footing, but this rally has run out of steam and it's clear that short-term fundamentals remain bearish.

Price action in oil has been odd, with prices weakening despite a significant amount of geopolitical risk in the Middle East. Meanwhile gas markets have strengthened as Europe faces numerous supply risks. On the agri front, comfortable supply has seen grain prices trend lower, while softs (cocoa, coffee and to a certain extent sugar) have seen more volatility due to weather concerns.

Looking ahead, we expect energy markets to come under pressure. The oil market is set to see fairly modest demand growth once again in 2025, which is partly cyclical and partly structural. In addition, we see another year of strong non-OPEC supply growth while OPEC still sits on a significant amount of spare production capacity, which should continue to provide comfort to the market. For now, we expect the oil market to be in surplus next year – although much will depend on OPEC+ production policy.

For European natural gas, we are cautiously bearish on prices through 2025, but this hinges on developments over the winter. Assuming a normal winter, we believe Europe should exit the heating season with comfortable storage. The ramping up of new LNG export capacity should allow the EU to refill storage comfortably even without Russian pipeline gas via Ukraine. However, the ramping up of US LNG export capacity leaves us more bullish on US natural gas prices with the market expected to tighten up.

For metals, we believe gold will hit new record highs in 2025. Central banks are set to continue to ease monetary policy, and there could be a move to safe haven assets due to an escalation in trade tensions. We also believe that central banks will remain strong buyers of gold as they look to diversify their reserves.

The outlook for industrial metals looks somewhat cloudy, with trade frictions and potential changes to the Inflation Reduction Act in the US weighing on metals. Metal markets will also be waiting to see if recent support measures from China will finally feed through to the commodities complex, and if not, whether there is more stimulus on the way.

Finally for agriculture, grains are likely to get caught up in any trade friction, particularly if we see retaliatory tariffs targeting US agricultural exports as we did in 2018. If so, we would expect to see pressure on prices. Meanwhile, weather remains a key risk and concern for soft commodities, and so we expect volatility in cocoa and coffee to continue into 2025 – at least until we get a better idea on how supply shapes up for next season.

Overall, we hold a somewhat bearish view on large parts of the commodities complex for 2025 on the back of relatively comfortable fundamentals, while expectations of a stronger USD should also provide some headwinds. In addition, external risks facing markets appear to be skewed to the downside.

Source:Reuters

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European Central Bank (ECB) to Cut, But by How Much?

What Are the Forecasts

It’s Also About the Future

The Effects of the Context

Source:Orbex

Nzd/usd Trades Above 0.5800 After Rebounding From Two-year Lows

Source: FXSTREET

Eur/jpy Price Forecast: Resumes Uptrend Within Ascending Trend Channel Above 160.00

Source: FXSTREET

Silver Price Forecast: Xag/usd Bulls Retain Control Above $32.00, Over One-month High

Source: FXSTREET

December 12th Financial News

[Quick Facts]

[News Details]

[Today's Focus]

Top Finance Quotes to Inspire Your Trading

1. “The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Philip Fisher

2. “In investing, what is comfortable is rarely profitable.” – Robert Arnott

3. “Risk comes from not knowing what you’re doing.” – Warren Buffett

4. “The goal of a successful trader is to make the best trades. Money is secondary.” – Alexander Elder

5. “The four most dangerous words in investing are: This time it’s different.” – Sir John Templeton

6. “Do not be embarrassed by your failures, learn from them and start again.” – Richard Branson

7. “The market is a device for transferring money from the impatient to the patient.” – Warren Buffett

8. “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros

9. “The best traders have no ego.” – Mark Cook

Conclusion: How to Use These Quotes in Your Trading

Commodities Outlook 2025: A bearish Horizon

Source:Reuters

Risk Disclosure