Hi Folks.
As expected, due to lacking any numbers to tell them otherwise (as far as we know, anyway) the US Fed cut rates another quarter point, down to 3.75%. Still a far cry from the .00 to .25% rate that ruled the day for most of the decade. But now that the number is settled, everyone who is anyone in the trading world will be off on an extended Christmas/New Year's break. So even though we are going to see a flood of catch-up numbers this week, I think the aged nature of the numbers combined with the reduced volume/volatility/interest in trading by the big players will mean mostly flat charts starting now until Monday Jan. 5th. I could be wrong. It's happened before. Last year I had some guy self-deport from my list, saying the last 2 weeks of the year were always his best two weeks of the year. Then he called me a moron and like Elvis, left the building. So I went back into the December charts as the New Year rolled around and saw nothing but flatlines as far as the eye could see. So maybe this guy made all his money selling street Xanax to suicidal traders who needed one more big move to make their bonus numbers or something. Who knows? But the charts rarely impress from mid December on, and there is no reason to think this year will be any different. So as usual, be very careful out there this week.
Now on with the forecast.
SUNDAY: We start with what is becoming a regular Sunday Night feature: A New Zealand number that drops before any of the markets even open. In this case it's the BusinessNZ Services Index, a number normally followed by PASS, which is exactly what we'll do here simply because the charts are all still asleep at 4:45 p.m. eastern. Once the green flag drops, at 6:50 p.m. the Japanese release their Tankan Manufacturing and Non Manufacturing Index numbers. These are quarterly numbers and occasionally generate 25-30 pips, like they did in March, but the June and September numbers landed in the 12-13 pip range. Figuring Sunday night, mid December, last two numbers well below 20, this one probably deserves a Pass. At 7:01 p.m. the Brits release their Rightmove Housing Price Index, and since it's a minute after midnight in the home country, we automatically Pass. Japan comes back at 11:30 p.m. with the Tertiary Industry Activity m/m number, but this one is a consistent 5-10 pip mover, so we close just the way we started today: Pass.
MONDAY: Asian/London Session: The early numbers (German WPI at 2:00 a.m.; Swiss SECO Economic Forecasts at 3:00; Eurozone Industrial Production at 5:00; Canadian Housing Starts at 8:15) can all be safely ignored. The Swiss PPI is also on the ignored list, but last month missed hitting 20 pips by a couple of ticks in the 30 minutes after the number release. But it also came out in the middle of a down move that started an hour earlier, so it's likely something else was behind the move besides the PPI, which posted 6 and 10 pip the two previous months. So Pass on Swiss PPI here. At 8:30 Canada bounces back with the CPI numbers (there are 5 or 6 of them), and while this one used to be an automatic watch and trade, lately it's been showing less and less, the last 3 months being 13, 27 and 15. The 27 pips 2 months ago was an Expectation -.1%, Actual +.1%, so when the other two numbers were either on target or worse than expected, the USDCAD ignored it. But better than expected = big move. So keep an eye on the actual number and if better than forecast, maybe get ready to trade. At 9:30 a.m. the Brits get their Conference Board Leading Index number, which no one trades, ever. So Pass. In the afternoon/evening there are a bunch of Australia/New Zealand and one Japanese number on calendar (those Flash Manufacturing PMI numbers are two of them) but none of them are dressed to impress and can be safely Ignored.
USA Session: We get the current Empire State Manufacturing Index number at 8:30 a.m., which is pretty close to a non-event in terms of trading, then Fed Speak at 9:30 and 10:30 a.m. That's it. A quiet day today, but that's pretty much our last one for a while as the flood of antique numbers begins tomorrow.
TUESDAY: Asian/London Session: We open with the British Unemployment number, which has a running on again, off again love affair with traders. 3 months ago this one just managed 14 pips. 2 months ago was 50 and last month was 36. 2 out of 3 is a pretty good reason to at least pay attention to this one. After that we get the Flash Manufacturing PMI numbers out of France (3:00), Germany (3:30), Eurozone (4:00), and Great Britain (4:30). No Canada numbers this time, I guess. See a trend forming after 3? Trade it. No trend = No Trade. The 5:00 a.m. Euro numbers for Trade Balance and Economic Sentiment can be heartily ignored. Later in the day we get the floating New Zealand GDT price Index (no specific time is ever given for this one), Canadian Fed Speak at 12:45 p.m., Westpac Consumer Sentiment out of New Zealand at 3:00 p.m., along with Current Account at 4:45, Australia has the Melbourne Institute Leading Index at 6:30 p.m. and like all the other Index numbers we keep seeing, it too can be safely ignored as well. Finally, at 6:50 p.m., Japan has their Core Machinery Orders, along with their Trade Balance. Neither tend to inspire traders and can be passed.
USA Session: 8:30 a.m. brings us our first Catch-Up session of the week. Non Farm Payroll from 11 days ago drops today, along with the Average Hourly Earnings and Unemployment Rate. We also get Retail Sales (Core and Overall) and the Weekly Unemployment Rate, and all of these are at least 11 days late or more. I have no idea how nostalgic traders are going to get over these numbers, and I hope they just ignore them and focus on any fresh data that might come out today. But we'll just have to tune in and find out for ourselves. At 9:45 we get the Flash Manufacturing and Services PMI, which is the lesser number to the ISM Manufacturing and Service numbers, so in spite of the lack of current news earlier, this one (or two) might not be enough to inspire traders, particularly given the date. Business Inventories drops at 10:00 a.m. but never, ever moves price around, even in the best of times, and we close with that API Oil Report at 4:30 that isn't tradeable.
WEDNESDAY: Asian/London Session: The Brits lead off for the second night in a row with their CPI numbers and a bunch of other numbers that always come out at the same time. 3 months ago it posted 16 pips, but since then we've seen 50+ and 36 out of the last two reports. Definitely worth a trade. 4:00 a.m. brings the German ifo Business Climate number (a perennial Pass), a generic Housing Price Index out of Great Britain at 4:30 p.m. (also a perennial Pass), Final CPI numbers out of the Eurozone (these do worse than the Preliminary numbers and we routinely Pass on the Preliminary versions so Pass here as well). The Brits return at 6:00 a.m. with their CBI Industrial Order Expectations number (Pass) and Canada makes a cameo today with their Foreign Securities Purchases, which is one of the few Canadian numbers that doesn't move the Loonie around even a little. A Swiss report at 9:00 is just that: a report, and therefore not tradeable. Finally, at 4:45 p.m. New Zealand drops a red folder GDP q/q number, and in doing so proves beyond a shadow of a doubt that these red folder reports do not mean what we think they mean. The last 3 quarters saw this GDP produce 2, 2, and finally a whopping 3 pips of price action in the 15 minutes after dropping. I shouldn't have to say it but I will: Pass. Lastly we get the Australian Melbourne Institute's Inflation Expectations number, and while it does generate more than 2 or 3 pips, it doesn't generate much more. So Pass.
USA Session: Crude Oil at 10:30, bookended by Fed Speak at 9:05 a.m. and 2:30 p.m.
THURSDAY: Asian/London Session: We start with the Swiss Trade Balance at 2:00 a.m., which typically does nothing in terms of price action, even on the CHF pairs, so Pass. But at 7:00 the Brits release their Interest Rate Decision, and this could well be the best trade setup of the entire week, impending Christmas holiday notwithstanding. The so-called "smart money" says there is a 60% chance the BOE will cut the 4.00% rate down to 3.75%, putting it in lockstep with the US Fed rate cut last week. 60% chance of cut means 40% chance of no rate cut, and this is pretty close to a 50/50 situation. That means a bit more than half the traders think cut and the rest think not. This is where the money gets made. One side or the other will be disappointed and we can expect fireworks no matter what the outcome. And just FYI, the last 3 numbers posted were 57, 39 and 38 pips, and those decisions were nowhere near as contentious as what we are seeing today (57 happened after a quarter point cut, 39 and 38 after the BOE stood pat at 4.00%). Do not miss this event. It could mean a very Merry Christmas for you. And stick around for the 7:30 a.m. BOE Governor Bailey Press Conference. There may be more to make during/after the presser. And as if that wasn't enough, at 8:15 the Eurozone releases THEIR interest rate decision. However, their rate has been steady at 2.15% for several meeting cycles, and the overwhelming consensus is that they will stand at 2.15% for another round. So there likely won't be as much activity as we will likely see with the GBP no matter what the decision might be. Given the last 3 numbers came in at 9, 25 and 20 on "stand pat" decisions, we'll likely see the same sort of response, although the holiday trading environment might not give away as many pips on what most consider a "sure thing". But if you're up a boatload of pips from the GBP decision, this one will likely reward you with at least enough to make it worth the risk. The presser follows at 8:45 and it could add a little spice to the morning as well. The evening New Zealand and Australian numbers aren't likely to generate much interest amongst traders, but the Bank of Japan gets in on the Interest Rate Fiesta with their own meeting right around midnight (listed as tentative as they never seem to release their decisions at the same time two months in a row). And there is a strong consensus that they will in fact raise their rates from .25% to .50%. They've only adjusted rates 3 times in the last 10 years so this is kind of a big deal strictly from an economic standpoint, even if everyone already knows it's going to happen. But the last rate bump, from .10% to .25%, happened on January 23rd 2025 and only generated about 6 pips, so this one probably won't be the best trade of the day. But rate decisions like this from the BOJ can surprise on rare occasions (at least they did 15-20 years ago...lately, not so much) so at least be aware it's on the agenda for the evening.
USA Session: More calendar weirdness with the CPI that was due 8 days ago (you know, before the Fed meeting) finally breathing fresh air today at 8:30 a.m. Maybe. Because this same number is also listed as "tentative" which means what, I don't know. Maybe they'll see a trainwreck number and decide to not release it? Who knows. For the first time in I don't know when, I'm actually pessimistic about the CPI doing much today. Normally this is one of the High Holy Days of trading, but the delay in release has taken away almost all the luster possessed by this inflation gauge. At least for this month. We also get Weekly Unemployment and the Philly Fed Manufacturing Index number, but neither of these has done much in terms of price action lately, even with Unemployment finally posting timely numbers. So, you know, it's CPI day so probably you should be ready to take a trade, but at least for today, don't get your hopes up too much. After that we get NatGas at 10:30 and then the TIC Long Term Purchases number (measuring difference between foreign purchases of long term bonds and US based purchases of the same). Coming out at 4:00 p.m. means nobody is left to trade this one, so don't be a hero. Pass.
FRIDAY: Asian/London Session: We open with both a number (Australian Commodity Prices y/y at 12:30 a.m.) and a "tentative" press conference from the BOJ about the rate decision they released earlier. I've gone back on the calendar to look at price action on the JPY during/after these pressers and it's bland at best. So is the Aussie Commodity number. So pass on both. At 2:00 a.m. the Germans release a pair of numbers (PPI and a Consumer Climate number). Pass on both. At the same time the Brits release a Public Sector Net Borrowing number (Pass) and Retail Sales. FF insists on labeling Retail Sales numbers as Red Folder events and they keep it up with this one, likely because the last 3 numbers posted were 44, 19 and 25 pips. Pretty respectable numbers for Retail Sales, so definitely give this one a look when the time comes. The rest of the numbers for the session are just fillers and can be ignored, including the Canadian Retail Sales number at 8:30, which has been posting 7's and 8's in terms of pips for the last 3 months (which is closer to typical for Retail Sales numbers from just about everywhere else). So shut it down for the holidays after the Brits post at 2:00 a.m.
USA Session: Existing Home Sales and the Revised UofM Consumer Sentiment and Inflation Expectations numbers all hit at 10:00 a.m. today. Home Sales is universally ignored by all, and the Revised UofM numbers rarely, if ever, move into 20 pip territory (the Preliminary numbers are the ones that get all the attention). It's 10 a.m. on the Friday before Christmas Week. Don't bother with today. Start your time off early and enjoy the next few days with friends and family. I intend to do the same.
That's it for this week. I will continue to write up the Forecast for the last 2 weeks of the year but don't expect much in terms of tradeable events. This is the time of year when trading, for the most part, take a holiday, and so should you. But if anything looks like it might be worth a glance over the next two weeks, I promise I'll point it out if possible.
So see you back here next week.
Jeff
