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10/06/21 10:53
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This week sees three major central banks meet to decide on interest rates. All three of the Fed, ECB and BoE are expected to leave rates unchanged, but the commentary around these decisions could cause volatility. Source: Bloomberg Shares Federal Reserve Inflation European Central Bank Central bank Interest rate Chris Beauchamp | Chief Market Analyst, London | Publication date: Monday 11 December 2023 15:40 Fed to rein in hopes of rate cuts? The Federal Reserve is expected to maintain the current Fed funds target range of 5.25-5.5% at the upcoming FOMC meeting. This decision is influenced by recent economic indicators such as softer activity numbers, cooling labour data, and moderate month-on-month inflation figures. These factors suggest that the current monetary policy is likely restrictive enough to bring inflation down to the desired 2% level in the coming months. However, the focus of attention is likely to be on the individual forecasts of Fed members. The market perceives that significant rate cuts are imminent, but it remains to be seen how far the Fed members will align with this sentiment. It is anticipated that there will be considerable resistance to such expectations. Markets are now firmly anticipating the possibility of aggressive interest rate cuts by the Fed in 2023. On November 1st, after the Fed kept rates steady, markets saw only a 20% chance of a final rate hike in December and expected around 90 basis points of cuts through 2024. Currently, markets clearly believe interest rates have peaked, with 125 basis points of cuts priced in over the next year. The risk for this Fed meeting is that the central bank proves to be insufficiently dovish for current investor expectations. Risk assets like stocks having come so far since late October that they are now pricing in a lot more good news. Disappointment in the wake of the Fed meeting could spark a selloff in equities and a surge in the dollar that could undermine hopes of a ‘Santa rally’ in stock markets. ECB split on the way forward The European Central Bank (ECB) is facing internal disagreements regarding future monetary policy. Some members are open to further rate hikes, while others believe rate cuts may be necessary. The weak economic backdrop does not justify rate hikes, but the solid labour market and wage growth, along with inflation above target, make discussions on rate cuts premature. The ECB has mentioned the "last mile" in bringing inflation back to target, emphasizing the need to keep rates higher for longer. Wage settlements will also play a significant role in determining the ECB's stance. Despite the ECB's gradual shift towards a more dovish stance, there is a risk of underestimating disinflation. The ECB is cautious after years of above-target inflation, and will be slow in moving towards a more dovish stance. Bank of England to stick to tough stance on inflation The Bank of England (BoE) is expected to maintain its firm stance against interest rate cuts in the UK, despite other central banks considering a change in their approach to inflation. The BoE is projected to keep borrowing costs at a 15-year high and emphasise the need for elevated rates to combat stubborn inflation in the country. While the European Central Bank and the US Federal Reserve are also likely to keep their benchmark rates unchanged, officials at both institutions have indicated a potential shift towards rate cuts. Although the UK's inflation rate has decreased from its peak of 11.1% a year ago, it remains above the BoE's 2% target. The BoE is concerned that despite signs of a cooling labour market, wage growth remains strong following the 14 consecutive interest rate hikes between December 2021 and August this year. Governor Andrew Bailey and other members of the Monetary Policy Committee have consistently emphasized that it is premature to consider rate cuts. However, investors are pricing in a potential BoE rate cut for May or June next year. Nevertheless, the BoE is perceived to be lagging behind the ECB and the Fed, with markets indicating a 70% chance of rate cuts by March for both institutions. This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary. -
By Cryptoreach · Posted
Trends in the cryptocurrency market as of December 11, 2023: Market as a Whole: $1.71 trillion in market capitalization (-0.27% during the past day) Overall Market Sentiment: A little pessimistic, with Bitcoin becoming more and altcoins becoming less prevalent. Principal Patterns: Dominance of Bitcoin: With regard to the entire cryptocurrency market, Bitcoin's dominance rate has risen to 52.45%, a 2.5-year high. This implies that investors may be shifting their portfolios to safer, larger assets. Technical indicators: A strengthening of the upward trend is indicated by the fact that the weekly Relative Strength Index (RSI) for Bitcoin has risen over 70. In the near run, this might be encouraging for the price of Bitcoin. Price Action: After momentarily hitting $44,202, its highest level since April 2022, Bitcoin has been circling $44,100. Ethereum is remaining stable at $2,280. for more details -
Distinguishing between American and European style options is an important consideration for traders in major global indices. Let me provide some insights: The key difference between the two option styles lies in their exercise periods. American-style options can be exercised at any time up to and including the expiration date. This provides greater flexibility compared to European-style options, which can only be exercised on the expiration date. Most individual stock options traded on U.S. exchanges are American-style, while index options like the S&P 500 are predominantly European-style. This is because the indexes are cash-settled, so early exercise would serve no economic purpose. For the FT100 index traded on Euronext LIFFE in London, options are also European-style given the cash-settled nature of the contracts. Early exercise would not result in physical delivery of the underlying stocks. Understanding the option style is crucial for buyers, as it determines when the option can be exercised to realize profits or avoid losses. For sellers, it impacts risks from early assignment. Financial Analysts at Ruskin Felix Consulting LLC., help in distinguishing between American and European style options is an important consideration for traders in major global indices. The key difference lies in their exercise periods, with American-style options providing greater flexibility compared to European-style options which can only be exercised on expiration date. Most S&P 500 and FT100 options tend to be European-style given the characteristics of their underlying cash-settled indexes. But verifying exchange rules is prudent for any trader before engaging specific option contracts.
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