Global central bank easing expectations heat up, CAD and HKD face pressure, Crypto declines deepen

The Federal Reserve Still Has Room to Cut Rates, Market Confidence in Next Year’s Easing Policy Grows

Federal Reserve officials continue to signal dovish stance, injecting new expectations into the market. Federal Reserve Board member Christopher Waller( stated at a Yale University event that the current interest rate level remains slightly restrictive, with room for a 50 to 100 basis point rate cut in the future, aiming to bring the federal funds rate below 3%—a level considered more neutral and aligned with economic growth needs.

Waller emphasized that although inflation remains above the Fed’s 2% target, he expects inflation to start declining in the next 3 to 4 months, and tariffs will not continue to push prices higher. Nonetheless, he remains cautious about the short-term labor market but believes the overall economic outlook does not require an urgent rate cut, and the Fed can steadily proceed with policy adjustments. This stance is supported by investment banks like Goldman Sachs, which believe the Fed will be more willing to further cut rates next year than market expectations, with upcoming labor market data serving as an important indicator for rate decisions.

Crypto Market Under Pressure, Bitcoin and Ethereum Both Decline

Against the backdrop of global risk assets under pressure, the cryptocurrency market is also experiencing adjustments. According to the latest data, Bitcoin has fallen 0.60% in the past 24 hours, currently trading at $87,390; Ethereum has declined 0.27% in the same period, trading at $2,940. Compared to the data at the time of the original report (Bitcoin down 1.96% to $86,118, Ethereum down 4.51% to $2,828), recent declines have eased somewhat, but market sentiment remains cautious.

The adjustment in the crypto market is linked to the pressure on US tech stocks, with investors rotating among risk assets more rapidly, leading to volatile capital flows.

US Stocks Decline Across the Board, Nasdaq Leads Tech Sector Down

North American stock markets declined across the board, with all three major indices falling. The Dow Jones Industrial Average dropped 0.47%, the S&P 500 fell 1.16%, and the Nasdaq Composite declined the most, by 1.81%. The Philadelphia Semiconductor Index plunged 3.78%, reflecting selling pressure on tech and chips sectors.

Chinese concept stocks also underperformed, with the China Golden Dragon Index retreating 0.73%. European markets showed mixed performance: Germany’s DAX 30 fell 0.48%, France’s CAC 40 declined 0.25%, while the UK’s FTSE 100 rose 0.92%.

Tech Sector Financing Challenges Emerge, Industry Competition Reshapes

Financing environment for the tech industry faces uncertainties. Reports indicate that a large private equity credit firm has stalled negotiations on a major data center project with a well-known tech company, with a planned investment of around $10 billion possibly being shelved. This event has prompted a reassessment of tech stock financing capabilities, causing related companies’ shares to fall.

Meanwhile, competition in the AI field is intensifying. Google is accelerating the development of its autonomous AI chip TPU, collaborating with open-source communities to improve compatibility with mainstream AI frameworks, aiming to break the market dominance of leading chip manufacturers. This move has exerted downward pressure on chip industry stocks, with declines around 3.8%.

Geopolitical Tensions Drive Energy Markets, USD and JPY Strengthen

International developments are reshaping commodities markets. US sanctions on Venezuela have been further intensified, implementing a comprehensive blockade on sanctioned oil tankers entering and leaving the country, raising concerns over global oil supply. Although Venezuela’s current oil output is well below the 10-year high, with monthly exports of about 590,000 barrels—negligible compared to the global daily consumption of 100 million barrels—sanctions still increase investors’ risk premiums.

WTI crude oil rose 2.85%, to $56.74 per barrel, ending a four-day decline. Gold, as a safe-haven asset, increased 0.85%, to $4,338.8 per ounce, reaching a high of $4,349.

The US is also preparing to impose a new round of sanctions on Russia’s energy sector. If Russia refuses to accept a peace agreement with Ukraine, measures could be implemented as early as this week, further increasing uncertainty in the global energy markets.

In the forex market, the US dollar index rose 0.19% to 98.39, USD/JPY increased 0.63%, while EUR/USD declined 0.07%. Notably, the Canadian dollar hit a historic low against the Hong Kong dollar, reflecting a re-pricing of relative values among different currencies due to global interest rate environments and commodity price fluctuations.

UK Inflation Unexpectedly Falls, Bank of England Rate Cut Expectations Rise

UK November Consumer Price Index) (CPI) rose 3.2% year-on-year, the lowest in 8 months, below market expectations of 3.5%, and down from 3.6% previously. Month-on-month, CPI fell 0.2%. Core CPI increased 3.2% annually, also below the expected 3.4%.

The unexpected inflation data has immediately fueled market expectations for a rate cut by the Bank of England. Investors have fully priced in a 0.25% rate cut tomorrow and are also expecting further cuts of over 0.68% next year, implying more than a 70% probability of at least three rate cuts. The pound weakened accordingly, briefly falling below 1.34 against the US dollar.

Hong Kong Stock Index Futures Weak, Market Sentiment Cautious

Hong Kong stock index futures showed weakness. The Hang Seng Index night futures closed at 25,304 points, down 165 points from yesterday’s close of 25,468. The China Enterprises Index night futures closed at 8,785 points, down 59 points from yesterday. Trading volume was limited, with 14,744 contracts traded, reflecting cautious investor sentiment.

Bond Market Stable, Interest Rate Outlook in Focus

The US 10-year Treasury yield remains around 4.15%, unchanged from the previous trading day. Despite the strengthening dollar index, market expectations have already priced in the possibility of continued easing by the central bank. Short-term yields are expected to fluctuate near current levels until the upcoming central bank decision next week, which may trigger a directional breakout.

Key Events Today

Several major economic data releases and policy signals are scheduled: Trump’s nationwide speech, Switzerland’s November trade balance, UK’s interest rate decision and meeting minutes, European Central Bank rate decision, US November unadjusted CPI, US December Philadelphia Fed Manufacturing Index, initial jobless claims, and ECB President Lagarde’s press conference. These events will be key market focuses and could trigger new volatility.