Dec 11 2024: Asian stock markets and the U.S. dollar paused on Wednesday as investors awaited key inflation data from the United States and a potential rate cut in Canada. These developments are likely to influence expectations for further monetary easing by the U.S. Federal Reserve.
While an 85% probability of a U.S. rate cut next week is already priced in, markets remain cautious. The S&P 500 edged down 0.3% on Tuesday, staying just shy of its all-time high. U.S. futures ticked up 0.1% during the Asian session, while European and FTSE futures fell by 0.2% and 0.4%, respectively.
In Asia, MSCI’s broad index of regional shares outside Japan dropped 0.4%, and Japan’s Nikkei was flat. Analysts expect U.S. consumer prices to rise by 0.3% month-on-month in November, but an unexpected 0.4% increase could spark volatility, potentially strengthening the dollar and pressuring equities.
The U.S. dollar index stood at 106.4, with analysts predicting movement towards 105.1 if inflation meets expectations, or a rise to 108.1 if inflation surprises to the upside.
Canadian Dollar and Global Central Bank Moves
The Canadian dollar remained near a 4.5-year low of C$1.4165 per dollar, with markets pricing an 89% chance of a 50-basis-point rate cut by the Bank of Canada later in the day. This would follow a sharp rise in unemployment to 6.8% in November.
Elsewhere, the euro hovered at $1.0524, and the yen traded at 151.73 per dollar. Markets fully expect a European Central Bank rate cut on Thursday, with a 61% chance of a 50-basis-point cut by the Swiss National Bank to curb the franc’s strength.
Commodities and Currency Highlights
Australia’s central bank left rates unchanged on Tuesday but shifted to a more dovish stance, sending the Aussie dollar down 1% to $0.6372. The kiwi also weakened to $0.5792.
Gold held above its 200-day moving average at $2,688 an ounce, supported by renewed Chinese reserve purchases. In oil markets, Brent crude futures rose 47 cents to $72.65 a barrel, buoyed by China’s recent policy easing.
Arabica coffee prices surged to a record high of $3.48 per pound, driven by concerns over drought in Brazil, the world’s largest producer.
