Jobless Claims & PPI Reports Offsetting Influences

CURRENCIES

The December U.S. dollar index futures are steady. There was limited reaction to this morning’s U.S. economic reports, which appeared to be offsetting influences.

The European Central Bank at its policy meeting today lowered its key interest rate by 25 basis points as expected. This is the fourth rate cut this year and brings its key interest rate down to 3.0%.

Analysts now expect a faster pace of policy easing from the ECB, with predictions of a quarter-point rate reduction at every meeting through June.

It is widely expected that the Bank of England will keep its bank rate unchanged at 4.75% at its policy meeting on December 19. However, lower interest rates from the BOE are predicted next year.

The fundamentals and technicals remain supportive to the U.S. dollar, and higher prices are likely.

The fundamentals and technicals remain bearish for the euro currency and the British pound, and lower prices are likely.

The Swiss National Bank cut its key policy rate by 50 basis points to 0.5% at its policy meeting today, which exceeds market expectations for a smaller 25 basis point reduction. This marks the fourth straight rate reduction and the steepest since January 2015, bringing borrowing costs to the lowest level since November 2022.

The Bank of Japan will hold a policy meeting on December 19. Some analysts expect the BOJ will increase short-term interest rates from the current 0.25%.

Australia’s jobless rate declined to an eight-month low in November. The jobless rate dropped to 3.9% in November from 4.1% in October. Analysts expected an increase to 4.2%.

STOCK INDEX FUTURES

Stock index futures are lower.

The November producer price index increased 0.4% when up 0.3% was expected, and the producer price index excluding food and energy advanced 0.2% as forecast.

Jobless claims in the week ended December 7 were 242,000 when 220,000 were estimated.

There are indications that the U.S. economy will perform better than the consensus view in 2025.

The long term fundamentals and technicals remain supportive to stock index futures.

INTEREST RATES

Futures are mostly higher, especially at the front and middle of the yield curve.

U.S. Treasury will auction 30-year bonds today.

There are no Federal Reserve speakers scheduled between now and the December 18 Federal Open Market Committee meeting, which is in keeping with the central bank’s self-imposed blackout period in advance of policy meetings.

There is a 97% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its December 18 policy meeting, and there is a 3% chance of the FOMC keeping rates unchanged at 4.50% – 4.75%.

It is likely that the FOMC will be slower to add accommodation in 2025 than the consensus view.

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