This year, central banks in the United States; Japan; the United Kingdom; Norway and Sweden, among others, continued the tradition of holding meetings before Christmas to make policy decisions. The biggest gift came from the Federal Reserve, which cut its policy rate target by 25 basis points as expected, but Powell sent a clear hawkish message, stressing that the easing cycle had entered a "new phase" and that the Fed was seeking to slow the pace of rate cuts. The updated "dot plot" now predicts only two rate cuts next year. This decision has pushed the entire U.S. benchmark interest rate curve up by about 13-15 basis points, and the market currently expects the Fed to cut interest rates next year by only 40 basis points.

The Bank of Japan and the Bank of England both kept policy rates unchanged at 0.25% and 4.75% respectively, in line with consensus expectations. The Bank of Japan is expected to raise policy rates in January as the economic recovery gets on track. The Bank of England's vote showed a dovish split but still signaled a gradual rate cut. The next rate cut is expected to be in February, by 25 points.

Before the end of last week, the U.S. stock market rebounded across the board, with all three major stock indexes recording significant gains. The main factor driving the market rebound was that the core personal consumption expenditures (PCE) price index data in November was lower than expected. But it still failed to recover this week's cumulative decline. The Dow Jones Industrial Average fell about 2% for the week to 42,840.26 points; the Nasdaq fell 1.8% to close at 19,572.60 points; and the S&P 500 fell 2% for the week to 5,930.87, ending a tumultuous week.

U.S. economic data showed that inflation is slowing, and gold prices continued their gains last Friday (December 18), supported by a weaker U.S. dollar and U.S. Treasury yields. But so far last week, the Fed's hawkish interest rate outlook has caused gold prices to fall 0.9%, closing at around $2,623 for the week.

Silver prices last week continued a decline that began on December 12 and fell below $30.00 in the middle of last week. The gray metal hit a new three-month low of $28.740 late last week. Non-yielding assets such as silver are under downward pressure as major central banks emphasize the need to be cautious about further interest rate cuts.

In the complex landscape of the global economy, the foreign exchange market is always full of variables and opportunities.

The U.S. dollar retreated after hitting a two-year high of 108.55 early last week, but maintained its overall weekly gain. The U.S. Federal Reserve cut interest rates by 25 basis points and said the cuts would be smaller in 2025, which supported the dollar to some extent. This week it reported 107.64, up 0.82%.

JPY: USD/JPY fell to a five-month low of 157.93 after the Bank of Japan kept interest rates unchanged. The Bank of Japan's interest rate decision will support the yen in the short term. However, long-term trends still require observation of changes in the global economy and monetary policy.

GBP: The Bank of England kept interest rates unchanged, a decision that had an impact on GBP. Sterling fell to a one-month low of $1.2475, marking a third straight weekly loss. The Bank of England's interest rate decision and uncertainty about the Brexit process are the main factors affecting the trend of the pound.

Euro: Higher before the weekend, but fell for a third straight week, falling to a one-month low of $1.03435 during the session, marking a third straight weekly loss. Trump's comments and global trade tensions are important factors affecting the euro.

Australian dollar: ended lower for the third consecutive week, reaching a low of 0.6199 in more than two years before the end of last week. Spot prices were trading above 0.6200 before the weekend, but there is still a lack of bullish conviction in the short term. The Fed's hawkish signal that it will slow the pace of interest rate cuts in 2025 should be a bearish factor for the Australian dollar.

Last week, the international crude oil market closed steady, with Brent crude oil futures rising 0.08% to US$72.94 per barrel, while WTI crude oil futures rose 0.12% to US$69.46 per barrel. Spot oil prices were at $69.44, up 0.56%. Last week, the two major benchmark crude oil futures fell by about 2.5%. While the market weighs expectations of U.S. interest rate cuts against demand prospects, a pullback in the U.S. dollar has provided some support for the crude oil market.

Bitcoin extended its downward trend last week after hitting a new all-time high as hawkish signals from the Federal Reserve prompted traders to sell off the asset that has doubled this year. Bitcoin fell 5% to $92,280 in New York trading on Friday morning (December 20), after breaking through a record high of $108,000 this week. Short-term short-term control of the situation,

In the United States, the impact of tariff threats on market sentiment. The U.S. 10-year Treasury note yield fell slightly in the bond market last week, falling to 4.51% from 4.57% on Thursday.

Outlook for this week:

In the new week, market focus is expected to be soft due to the Christmas holiday. However, because of this, there is a lack of a focus that will further hit non-US currencies, gold and silver. Among them, the attitudes of the Federal Reserve and non-U.S. officials are noteworthy. Please note whether gold, silver and non-USD currencies will attract funds to buy on the decline after they have accumulated sharp declines. At the same time, if the Bank of Japan meeting minutes hint at the possibility of raising interest rates, this will also help non-USD currencies rebound and support gold and silver.

This year, policy decisions in the United States, Japan, the United Kingdom, Norway and Sweden continue the tradition of central bank meetings before Christmas. The biggest gift came from the Fed, in the form of a hawkish surprise. The Fed lowered its policy rate target by 25 basis points to 4.25-4.50% as expected, but Powell sent a clear hawkish message, emphasizing that the easing cycle has entered a "new phase" and the Fed is seeking to slow the pace of interest rate cuts. The updated "points" now expect just two 25 basis point cuts next year, compared with four in September's forecast. The main reason for the hawkish turn was the upward revision of the inflation forecast to 2.5% in 2025 (up from 2.1%), and the fact that most members even considered the new inflation forecast to have upside risks. This decision pushed the entire U.S. Treasury curve up by about 1,300-150 basis points, and the market is currently pricing in a Fed rate cut of just 40 basis points next year. Four more cuts are expected next March due to changes in guidance.

As widely expected, the Bank of Japan and the Bank of England kept policy rates unchanged at 0.25% and 4.75% respectively. With the economic recovery on track, the Bank of Japan is expected to raise interest rates in January. The Bank of England offered a mildly divided vote but continued to signal a gradual approach to cuts. The next rate cut is expected to come in February, with it expected to come at a quarter-point pace thereafter. Sweden and Norway see page 4.

On the data front, the December PMI survey brought some relief to the growth outlook, as services PMIs in the US, Eurozone and UK all rose more than expected. After falling sharply in November, the euro zone's services PMIs rebounded to above 50, suggesting economic activity is being maintained, while the U.S. services PMI rose further to 58.5 from 56.1. Compared with services, manufacturing activity weakened, with the US manufacturing PMI falling to 48.3, the UK to 47.3 and the euro zone unchanged at 45.2.

On the political front, the risk of a U.S. government shutdown increased this week as President-elect Donald Trump told Republican members of Congress not to support a stopgap funding bill that would otherwise pass Congress. In the absence of other plans, the government risks another shutdown, with a less severe economic impact than in 2018 but still an unpleasant Christmas gift for public workers.

The focus in the coming weeks will be the US job market report and ISM survey, Eurozone inflation, Chinese PMI and the Chinese central bank interest rate decision. U.S. nonfarm payroll growth is expected to slow to +170,000 (from +227,000), with the unemployment rate holding steady at 4.2% and average hourly earnings growth at +0.3%. We expect Eurozone HICP inflation to rise to 2.4% in December from 2.2% in November. The increase is mainly due to the base effect of energy and food inflation, while core inflation is expected to fall to 2.6% year-on-year from 2.7% in November. In China, PMI is expected to remain unchanged

Overview of important events and economic data this week: (AEDT)

Important matters: Tuesday (December 24): Bank of Canada releases minutes of December monetary policy meeting; Reserve Bank of Australia.

 Release of minutes of December monetary policy meeting

 Friday (December 27): The Bank of Japan released a summary of the opinions of the review committee of the December monetary policy meeting

Economic data overview:

Monday (December 23): UK third quarter GDP annual rate final value (%).

Tuesday (December 24): Canada October seasonally adjusted GDP monthly; Rate (%); U.S. Conference Board Consumer Confidence Index in December; U.S. November construction permit monthly rate revision (%); U.S. November durable goods orders monthly rate initial value (%); Annualized total number of new home sales in the United States in November after seasonally adjustment (10,000 households)

Friday (December 27): Number of initial jobless claims in the United States for the week as of December 21 (thousands); United States as of December 14;  Number of people continuing to apply for unemployment benefits this week (10,000); Japan’s Tokyo CPI annual rate in December (%); Japan’s unemployment rate in November (%). 

Saturday (December 28): U.S. November initial wholesale inventory monthly rate (%).

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