 Dollar regained some traction overnight, supported by strong services sector data that bolstered expectations for Fed to hold interest rates steady this month. Fed fund futures now imply a 95% probability of no rate cut in January, up from 90% last week. The upbeat economic performance placed moderate downward pressure on both equities and bonds, as markets reassess the Fed's path. Attention now turns to Friday’s non-farm payroll report, which could finalize the case for the Fed’s January decision and shift market focus toward policy moves for the remainder of the year. The upcoming release of FOMC December meeting minutes today is another critical event for traders. At the meeting, policymakers projected a median year-end federal funds rate target of 3.75%–4.00%, reflecting a 50bps reduction from current levels. The minutes are expected to provide valuable insight into Fed’s internal deliberations, shedding light on whether risks favor a steeper or shallower easing path in 2025. This will be key in shaping market expectations for monetary policy throughout the year. Elsewhere, Australian Dollar is under pressure today following release of November monthly CPI data. While headline inflation ticked higher due to the fading impact of energy rebates, the slowdown in trimmed mean CPI—a key measure of core inflation—provided welcome evidence of disinflation. Australian Treasurer Jim Chalmers highlighted the notable improvement in services inflation, which fell from 4.8% to 4.2%. Market expectations for an RBA rate cut in February have now increased to 60%-75%, with traders leaning toward an earlier start to the central bank’s easing cycle, rather than the May timeline initially anticipated.... |
