TGIF in what is a holiday-shortened week. What is moving the markets. In Europe there was no economic data out of Europe today and traders are reluctantly back from the Christmas and Boxing day holiday. In the US there will be some modest data out at 8:30 AM ET with:

  • Good trade balance for November, Est. -100.6B vs -99.0B last month. With the Trump tariffs expected this may be influenced
  • Whole inventories advanced for November. Est 0.2% vs 0.2% last month. Retail inventories ex auto is also due . Last month the data showed a 0.1% gain

What is moving... Well if open, the markets are moving. Looking at the USD, it is modestly lower/mixed vs the major currencies:

  • EUR -0.12%
  • JPY -0.15%
  • GBP -0.24%
  • CHF +0.18%
  • CAD -0.22%
  • AUD unchanged
  • NZD -0.25%

The USDJPY reached a new high going back to July 17 yesterday but has backed off modestly. The pair has been supported as the Fed has pared back the number of cuts in 2025 and the Bank of Japan taps the brakes on expectations for more hikes as a result of uncertainty from the new US President Trump and the impact from the expected tariffs.

Yesterday in the US stocks, they closed mixed with modest changes on the day

  • Dow rose 28.77 points or 0.07%
  • S&P fell -2.45 points or -0.04%
  • Nasdaq fell -10.77 points or -0.05%

In premarket trading today, the futures are implying a lower open:

  • Dow --153 points
  • S&P -21 points
  • Nasdaq -80 points

In the US debt market, the yields are mixed with the shorter end lower and the longer end of the curve higher after moving lower yesterday:

  • 2-year 4.328%, -0.04 bps
  • 5-year 4.445%, up 1.2 bps
  • 10-year 4.601% up 2.2 bps
  • 30-year 4.796%, up 3.5 bps

In other markets:

  • Crude oil is trading up $0.59 or 0.83% at $70.21
  • Gold is down -$7.00 or -0.27% at $2625.50
  • Silver is doen -$0.27 or -0.95% at $29.51
  • Bitcoin is trading up $537 at $96240

In other news, Goldman Sachs sees a Fed cut in March and 3 total cuts in 2025. That is more aggressive than the market is pricing and the Fed is projected (the market is actually marginally less than 2 cuts). The cuts will come despite solid growth, core PCE still greater than 2% and unemployment rate steady to lower by year end. Specifically:

  • Federal Reserve Predictions:

    • First interest rate cut of 25bps expected in March 2025.
    • Two additional cuts of 25bps forecasted for June and September, bringing the terminal rate to 3.5%-3.75%.
    • Balance sheet runoff expected to slow in January 2025 and halt entirely by Q2 2025.

  • U.S. Economic Outlook:

    • Real GDP growth projected at 2.4% year-over-year in 2025, driven by robust real income growth and easing financial conditions.
    • Core PCE inflation expected to decelerate to 2.4% by the end of 2025, helped by cooling shelter inflation and easing wage pressures.
    • Unemployment rate predicted to decline gradually, reaching 4.0% by year-end 2025.

  • Global Economic Outlook:

    • Global GDP growth forecasted at 2.7% year-over-year in 2025, supported by easing financial conditions and rising disposable incomes.
    • Eurozone: ECB expected to continue rate reductions until mid-2025.
    • China: GDP growth anticipated to slow to 4.5% due to domestic challenges.

  • Risks and Geopolitical Developments:

    • Risks from U.S. policy shifts under the incoming Trump administration, including higher tariffs on China and autos, lower immigration, and potential new tax cuts.
    • Moderate inflationary boost expected from tariffs.