Forexlive Americas FX news wrap: ECB cuts rates by 25 basis points

• ECB cuts key rates by 25 bps in December monetary policy decision, as expected
• ECB cuts 2024 HICP forecast to 2.4% from 2.5%, growth outlook remains sluggish
• Lagarde: Growth is losing momentum
• Lagarde Q&A: There were some discussions around considering 50 bps
• ECB sources: Handful of policymakers were initially in favor of 50 bps cut
• ECB prepared for 25 bps rate cut at each of the next two meetings – report
• US initial jobless claims 242K vs 220K estimate
• US November PPI +3.0% vs +2.6% expected
• US Treasury auctions $22B of 30 year bonds at a high yield of 4.535%
• Italy’s economy minister sees GDP growth of +0.7% this year
• China’s central economic work confernce: Will maintain basis stability of the Yuan
• Canada October building permits -3.1% vs -5.0% expected
• Pantheon sees core PCE at 0.13% (round to 0.1%) vs 0.2% last month after PPI data

Markets:

• Gold down $36 to $2682
• WTI crude oil down 20-cents to $70.09
• US 10-year yields up 6.5 bps to 4.33%
• S&P 500 down 0.5%
• USD leads, CHF lags

The euro intraday chart today was the kind of thing that trading nightmares are made of. It swing several times between 1.0470 and 1.0520 for no discernable reason. The ECB decision was in-line with estimates and the ‘meeting by meeting’ comments were also expected. The ‘ECB sources’ leak about expecting 25 bps cuts at each of the next two meetings was also in-line with market pricing. GDP and inflation forecasts ticked lower but, if anything, they remain higher than the street. Ultimately, the euro ended the day at the bottom of that range but that was more about the US dollar.

The dollar got a lift from hotter PPI numbers and a soft 30-year auction. Earlier, there was a battle between PPI and jobless claims but the former won out. Tariff considerations are also slowly coming to the forefront as well, with Canada talking tough about retaliation. That helped to drive USD/CAD to a four year high.

The 50 basis point rate cut in Switzerland underscored policy differences relative to the US, which continues to show a solid economy with optimism about corporate tax cuts in the US also building. Trump was at the NYSE today and talked about larger tax cuts for corporates, which may have also contributed to higher yields.

Headlines from the China Work Conference were in-fitting with recent talk about looser policy and fiscal help, particularly for consumers. However there were no specifics and it’s looking like we might have to wait until March parliamentary meetings to get them (if ever).

This article was written by Adam Button at www.forexlive.com.