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Global Market Sentiment: Central Banks’ Latest Decisions and Their Impact

Global Market Sentiment: Central Banks' Latest Decisions and Their Impact

Explore global market sentiment as central banks make cautious policy moves, including the Federal Reserve, ECB, and RBA. Learn how these decisions and the U.S. holiday on Martin Luther King Jr. Day impact currencies, commodities, and trading volumes.

Asian Session Overview

The Asian financial markets remained relatively calm during the latest trading session, as no major news events scheduled to disrupt the status quo. This calm atmosphere will continue throughout the day as traders anticipate a short trading session.

Impact on European and U.S. Sessions

As the financial markets in the U.S. remain closed in observance of Martin Luther King Jr. Day, trading activity and volume will decrease significantly after European trading hours conclude. This holiday-induced slowdown will likely result in a subdued session for the Dollar Index (DXY) and other major currency pairs.

Dollar Index (DXY) Outlook

  • Key Event: Martin Luther King Jr. Day (All Day)
  • Expected Movement: With U.S. markets closed, the Dollar Index will see limited movement. Trading volumes will be thin, likely continuing the muted activity observed during the Asian session.

Global Market Sentiment: Central Banks’ Latest Decisions and Their Impact

Central Bank Notes and Market Sentiment

  1. Federal Reserve:
    • The Federal Reserve recently lowered the Federal Funds Rate target range by 25 basis points from 4.25% to 4.50% on December 18. This decision reflects a cautious approach to monetary policy amid an uncertain economic outlook.
    • Inflation remains elevated but is progressing towards the 2% objective.
    • Next meeting: January 28-29, 2025.
  2. Reserve Bank of Australia (RBA):
    • Since December 10, the RBA has maintained the cash rate target at 4.35%. Inflation pressures have eased but remain above target.
    • Next meeting: February 18, 2025.
  3. Bank of Japan (BOJ):
    • The BOJ maintains a low-interest-rate environment with the overnight call rate at around 0.25%.
    • Next meeting: January 24, 2025.
  4. European Central Bank (ECB):
    • On December 12, the ECB reduced interest rates by 25 basis points to maintain inflation around the 2% medium-term target.
    • Next meeting: January 30, 2025.
  5. Bank of England (BOE):
    • The BOE held its rate steady at 4.75% on December 19, focusing on achieving its 2% inflation target.
    • Next meeting: February 6, 2025.
  6. Swiss National Bank (SNB):
    • On December 12, the SNB reduced its policy rate by 50 basis points to 0.50% as inflationary pressures continued to ease.
    • Next meeting: March 20, 2025.
  7. Bank of Canada (BOC):
    • The BOC reduced its overnight rate to 3.25% on December 11, citing weaker economic growth and subdued inflation.
    • Next meeting: January 29, 2025.

Currency and Commodity Analysis

  • Gold (XAU):
    • Bias: Medium Bearish
    • Since U.S. markets closed, gold trading will likely remain quiet.
  • Australian Dollar (AUD):
    • Bias: Weak Bullish
    • The AUD has shown resilience, rebounding last week, and could edge higher today.
  • New Zealand Dollar (NZD):
    • Bias: Weak Bullish
    • After recent declines, the NZD is showing signs of recovery.
  • Japanese Yen (JPY):
    • Bias: Weak Bearish
    • The yen strengthened last week but faces potential downward pressure today.
  • Euro (EUR):
    • Bias: Weak Bullish
    • The EUR has stabilized and is showing an upward trend.
  • Swiss Franc (CHF):
    • Bias: Medium Bullish
    • The CHF has gained marginally, continuing its strength.
  • Pound (GBP):
    • Bias: Weak Bullish
    • After a poor start to the year, the GBP is finding some stability.
  • Canadian Dollar (CAD):
    • Bias: Weak Bullish
    • The CAD is under pressure but remains poised for minor gains.
  • Oil:
    • Bias: Medium Bearish
    • Crude prices have risen, but analysts expect to face selling pressure today.

Conclusion

With Martin Luther King Jr. Day leading to a holiday in the U.S., global markets will likely experience low trading volumes and limited volatility. Traders will monitor European markets for significant movements before the U.S. markets reopen on Tuesday.

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