In Currency Movements
Cryptocurrencies continue to show resilience with Bitcoin stabilising above $91,000 and Ethereum maintaining levels above $3,100. This comes ahead of the Federal Reserve’s imminent monetary policy meeting, anticipated to include a rate cut.
Ripple saw a decline, trading at $2.06, despite positive trends in other crypto assets, with market sentiment showing challenges. Central bank meetings for the RBA, BoC, and SNB are expected to bring minimal surprises, but they remain under observation.
Federal Reserve Meeting Focus
The focus for the next few days is entirely on the Federal Reserve’s meeting on December 10th. That September PCE inflation report, which came in at 2.8%, was merely confirmation of the cooling trend we have been tracking. The market is already positioned for what would be the third straight interest rate cut.
We are looking at a market that has almost fully priced this in, with Fed funds futures implying over an 85% probability of another 25-basis-point reduction. This anticipation is the primary reason the US Dollar has struggled for momentum, despite recent mild bounces. US Treasury yields have also been trending lower for months, reflecting this clear shift in policy.
For derivative traders, the rate cut itself is now old news; the real play is on the future guidance. With the VIX index holding firm around 17, reflecting more uncertainty than we saw in the calm of 2024, options are priced for a significant move following the announcement. We believe positioning for a surprise in the Fed’s dot plot or rhetoric is key, as a dovish confirmation might lead to a volatility crush.
