The Federal Reserve cut interest rates by 25 basis points as expected, but surprised markets with a hawkish outlook, signaling only two potential rate cuts in 2025. The US dollar surged against major currencies, including the British pound and the euro, as investors sought safe-haven assets.
Financial markets largely traded cautiously ahead of the Federal Reserve 's (Fed) monetary policy announcement on Thursday, December 19. The Fed delivered a hawkish cut, as anticipated, resulting in the US Dollar surging in a risk-averse environment. The Greenback pressured fresh weekly highs across the board, maintaining strong positive momentum.
Investors were surprised by a dot plot showing just two potential rate cuts in 2025, a significant hawkish shift following the expected 25 basis points (bps) rate cut. Later, Chair Jerome Powell further emphasized a hawkish stance, stating that the economy remains strong and that they have likely avoided a recession. Earlier, the United Kingdom (UK) released its monthly inflation report, revealing that the Consumer Price Index (CPI) rose 2.6% year-on-year in November, up from 2.3% in October. Core annual inflation climbed to 3.5%, exceeding the previous 3.3% but falling short of the anticipated 3.6%. As Asian trading sessions commenced, the EUR/USD pair traded near 1.0332, nearing its 2024 low, while GBP/USD hovered around 1.2580. Commodities-linked currencies suffered among the worst performances amidst a Wall Street decline. AUD/USD remained around 0.6220, while USD/CAD traded at 1.4429, with both CAD and AUD reaching fresh yearly lows against the US Dollar. Safe-haven assets also weakened against the USD. USD/JPY traded near 154.60, approaching a fresh December high, while Gold fell below the $2,600 mark for the first time in a month. The Bank of Japan (BoJ) was next on the schedule, with expectations for rates to remain unchanged, though a rate hike was not entirely ruled out. Governor Kazuo Ueda was scheduled to hold a press conference afterward. Later in the day, the Bank of England (BoE) planned to announce its monetary policy decision early on Thursday
Economics Markets Central Banks Currency Federal Reserve US Dollar Interest Rates Hawkish Monetary Policy Inflation Pound Euro Bank Of Japan Bank Of England
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