Jump to content

A bumper week for central banks as Fed, ECB and BoE prepare to release rate decisions


Recommended Posts

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.

ECB shieldSource: Bloomberg
 
 Chris Beauchamp | Chief Market Analyst, London | Publication date: 

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.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • COST Elliott Wave Analysis Trading Lounge Daily Chart, Costco Wholesale Corp., (COST) Daily Chart COST Elliott Wave Technical Analysis FUNCTION: Counter Trend   MODE: Corrective STRUCTURE: ZigZag POSITION: Wave A.   DIRECTION: Downside in wave A.   DETAILS: The upside seems completed, looking for a correction in what could have been a top in wave (5) or wave 1 of (5).   COST Elliott Wave Analysis Trading Lounge 4Hr Chart, Costco Wholesale Corp., (COST) 4Hr Chart COST Elliott Wave Technical Analysis FUNCTION: Counter Trend   MODE: Corrective STRUCTURE: ZigZag POSITION: Wave {i} DIRECTION: Bottom in wave {i}. DETAILS: Looking for a bottom in wave {i} to then pullback and continue lower into at least one more leg lower in what could be either wave {iii} or some sort of wave C. Welcome to our latest Elliott Wave analysis for Costco Wholesale Corp. (COST). This analysis provides an in-depth look at COST's price movements using the Elliott Wave Theory, helping traders identify potential opportunities based on current trends and market structure. We will cover insights from both the daily and 4-hour charts to offer a comprehensive perspective on COST's market behavior.   * COST Elliott Wave Technical Analysis – Daily Chart* The daily chart suggests that the upside move appears to be completed, and we are now looking for a correction. This correction could signify the completion of a top in wave (5) or wave 1 of (5). Traders should be prepared for continued downside pressure as wave A unfolds. * COST Elliott Wave Technical Analysis – 4H Chart* The 4-hour chart indicates that we are looking for a bottom in wave {i} to then see a pullback. After this pullback, we anticipate at least one more leg lower, which could be either wave {iii} or some form of wave C.   Technical Analyst : Alessio Barretta Source  : Tradinglounge.com get trial here!  
    • Hang Seng Index: Elliott Wave Analysis Day Chart Hang Seng Index Elliott Wave Technical Analysis Function: Trend Mode: Impulsive Structure: Orange Wave 3 Position: Navy Blue Wave 3 Direction Next Higher Degrees: Orange Wave 3 (started) Details: Orange wave 2 looks completed. Now orange wave 3 of 3 is in play. Wave Cancel Invalid Level: 16044.39 The Hang Seng Index Elliott Wave Analysis for the day chart provides a detailed examination of the market's current trends and wave patterns. The analysis identifies the market's movement as part of an overall trend, indicating an impulsive mode rather than a corrective one. The specific wave structure under scrutiny is orange wave 3, which forms part of a larger navy blue wave 3. This suggests that the market is currently experiencing an upward trend characterized by successive impulsive waves. According to the analysis, orange wave 2 has completed, marking the end of the corrective phase within navy blue wave 3. With orange wave 2 concluded, the market has now entered orange wave 3, which is in progress. The direction anticipated next in this analysis is the continuation of orange wave 3, signaling further upward movement in the market. This phase, orange wave 3 of 3, indicates a strong impulsive trend within the broader wave structure, suggesting that the market is expected to continue its rise as part of the ongoing navy blue wave 3. An essential component of this analysis is the wave cancel invalid level, set at 16044.39. This level serves as a crucial reference point for traders, determining the validity of the current wave count. Should the market price move below this level, the existing wave analysis would be invalidated, necessitating a reassessment of the market's condition and potential strategic adjustments. This invalidation level is critical for risk management, providing traders with a clear threshold to monitor and ensuring that the wave analysis remains accurate. In summary, the Hang Seng Index day chart analysis identifies an upward trend in an impulsive mode characterized by orange wave 3 within navy blue wave 3. Orange wave 2 has been completed, and the market is now experiencing orange wave 3 of 3. The wave cancellation invalid level at 16044.39 is crucial for maintaining the accuracy of the current wave count and for effective risk management.   Hang Seng Index: Elliott Wave Analysis Weekly Chart Hang Seng Index Elliott Wave Technical Analysis Function: Trend Mode: Impulsive Structure: Orange Wave 3 Position: Navy Blue Wave 3 Direction Next Higher Degrees: Orange Wave 3 (started) Details: Orange wave 2 looks completed. Now orange wave 3 of 3 is in play. Wave Cancel Invalid Level: 16044.39 The Hang Seng Index Elliott Wave Analysis for the weekly chart focuses on the current trend and wave patterns in the market. The analysis identifies the market's movement as part of an impulsive trend rather than a corrective one, suggesting strong upward momentum. The primary wave structure being analyzed is orange wave 3, situated within a larger navy blue wave 3. This indicates a significant upward trend driven by successive impulsive waves. According to the analysis, orange wave 2 has been completed, marking the end of the recent corrective phase within navy blue wave 3. With orange wave 2 concluded, the market has entered orange wave 3, which is currently in progress. The expected direction in this analysis is the continuation of orange wave 3, suggesting further upward movement in the market. This phase, orange wave 3 of 3, points to a strong impulsive trend within the broader wave structure, implying that the market is likely to continue its rise as part of the ongoing navy blue wave 3. An important aspect of this analysis is the wave cancel invalid level, set at 16044.39. This level serves as a crucial reference point for traders, determining the validity of the current wave count. If the market price moves below this level, the existing wave analysis would be invalidated, requiring a reassessment of the market's condition and potential strategic adjustments. This invalidation level is vital for risk management, providing traders with a clear threshold to monitor and ensuring that the wave analysis remains accurate. In summary, the Hang Seng Index weekly chart analysis identifies a strong upward trend in an impulsive mode, characterized by orange wave 3 within navy blue wave 3. Orange wave 2 has been completed, and the market is now experiencing orange wave 3 of 3. The wave cancel invalid level at 16044.39 is critical for maintaining the accuracy of the current wave count and for effective risk management.   Technical Analyst : Malik Awais Source : Tradinglounge.com get trial here!  
    • EURUSD Day Chart Analysis EURUSD Elliott Wave Analysis - Trading Lounge Day Chart Euro/U.S. Dollar (EURUSD) Day Chart EURUSD Elliott Wave Technical Analysis Function: Counter Trend Mode: Corrective Structure: Orange Wave 2 Position: Navy Blue Wave 3 Direction Next Higher Degrees: Orange Wave 3 Details: Current Status: Orange Wave 1 appears complete. Current Phase: Orange Wave 2 is active. Wave Cancel Invalid Level: 1.06657 The EURUSD Elliott Wave analysis for the day chart examines the current market behavior and wave structure. The analysis indicates a counter-trend phase, suggesting a corrective movement within the broader trend. The specific wave structure under review is Orange Wave 2, which is part of Navy Blue Wave 3. This implies the market is in a corrective phase within a larger impulsive wave. The completion of Orange Wave 1 marks the end of an initial impulsive move within Navy Blue Wave 3. Now, the market is experiencing Orange Wave 2, a corrective wave that typically retraces some of the gains from the impulsive Wave 1. The next higher degree direction is identified as Orange Wave 3. This suggests that after the completion of Orange Wave 2, the market is expected to resume its impulsive trend with the start of Orange Wave 3. This phase will follow the corrective action of Orange Wave 2 and continue the primary trend. A critical element of this analysis is the wave cancel invalid level, set at 1.06657. This level is essential for traders as it serves as a benchmark to determine the validity of the current wave count. If the market price exceeds this level, the current wave count would be invalidated, necessitating a reassessment of the market conditions and potential repositioning. This invalidation point is crucial for risk management, providing a clear point at which traders should reconsider their analysis and strategies. Summary: The EURUSD day chart analysis identifies a corrective trend characterized by Orange Wave 2 within Navy Blue Wave 3. Orange Wave 1 is completed, and the market is now in the corrective phase of Orange Wave 2. The expected next phase is Orange Wave 3, following the completion of Orange Wave 2. The wave cancel invalid level at 1.06657 is critical for maintaining the current wave count's validity and for effective risk management.   EURUSD 4-Hour Chart Analysis EURUSD Elliott Wave Analysis - Trading Lounge 4-Hour Chart Euro/U.S. Dollar (EURUSD) 4-Hour Chart EURUSD Elliott Wave Technical Analysis Function: Counter Trend Mode: Corrective Structure: Orange Wave 2 Position: Navy Blue Wave 3 Direction Next Higher Degrees: Orange Wave 3 Details: Current Status: Orange Wave 1 appears complete. Current Phase: Orange Wave 2 is active. Wave Cancel Invalid Level: 1.06657 The EURUSD Elliott Wave analysis for the 4-hour chart examines the current market trends and wave patterns. The analysis identifies the market's movement as a counter-trend, indicating a corrective phase rather than an impulsive one. The specific wave structure under review is Orange Wave 2, which is part of a larger Navy Blue Wave 3. This suggests that the market is undergoing a correction within a broader upward trend. According to the analysis, Orange Wave 1 has completed, signaling the end of the initial impulsive move within Navy Blue Wave 3. Subsequently, the market has entered Orange Wave 2, which is a corrective phase that typically retraces some of the movement made during Orange Wave 1. The next anticipated direction in this analysis is Orange Wave 3. Once Orange Wave 2 concludes, the market is expected to resume its impulsive movement with the start of Orange Wave 3, continuing the overall trend set by Navy Blue Wave 3. An essential aspect of this analysis is the wave cancellation invalid level, set at 1.06657. This level serves as a critical reference point for traders, as it determines the validity of the current wave count. If the market price moves beyond this level, the existing wave analysis would be invalidated, requiring a reassessment of the market's condition and potential strategic adjustments. This invalidation level is vital for risk management, providing traders with a clear threshold to monitor. Summary: The EURUSD 4-hour chart analysis identifies a counter-trend characterized by Orange Wave 2 within Navy Blue Wave 3. Orange Wave 1 has been completed, and the market is now experiencing Orange Wave 2. The next phase expected is Orange Wave 3, following the completion of Orange Wave 2. The wave cancellation invalid level at 1.06657 is crucial for maintaining the accuracy of the current wave count and for effective risk management.   Technical Analyst : Malik Awais Source : Tradinglounge.com get trial here!  
×
×
  • Create New...
us