Forex Market Forecast for December 2024

With the conclusion of the US election and the end of Q3 earnings season, eyes now turn to December and interest rates, with several major central banks set to decide on their latest interest rate moves, including the Bank of England, the European Central Bank, the Federal Reserve and the Bank of England. of Japan. Here’s what to look for:

• Inflation: Although it may take longer to take effect, the potential tariffs enacted by incoming US President Donald Trump have raised concerns about inflation remaining or once again rising. Moreover, recent budget announcements in the UK have also raised inflationary concerns.
• Rate Decision: Given these potential inflationary concerns, will central banks be more cautious in their outlook for interest rates?
• US Dollar: The US dollar made strong gains against other major currencies in November. Will that trend continue or is a pullback in the cards?

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United States Dollar (USD)

A rate decision by the Federal Reserve on December 18 is expected to result in a cut. However, markets are now speculating that the Fed may slow the pace of tapering in 2025 due to the risk of rising inflation due to President-elect Donald Trump’s proposed policies. The US dollar had a strong November, and if markets continue with that narrative and the Fed then hints at a slowdown, that strength could continue. Citi said in a recent note that it believes the US dollar may experience a temporary pullback in December.

Basic level:

• EURUSD: Higher – 1.0670, lower – 1.0330
• GBPUSD: Higher – 1.2800, lower – 1.2525
• USDJPY: High – 157.60, Low – 149.30

Euro (EUR)

As for the European Central Bank, “markets are convinced” that the European Central Bank’s next rate cut will be in December and are eyeing a cut of more than 125bp by November next year, according to ING. This contrasts with more hawkish sentiment in the US and UK, which could lead to a weaker euro in December. ING also noted that a 50bp cut by the ECB in December is still on the table, with some central bank members concerned about the hike due to potential trade tensions. As we mentioned in our November forecast, the EURUSD has been in a bit of a range for some time. However, it declined in November, so the question now is whether that decline will continue into the final months of the year.

Basic level:

• EURUSD: Higher – 1.0670, lower – 1.0330
• EURGBP: Higher – 0.8525, lower – 0.8200

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British Pound (GBP)

As with other currencies, the GBP bounced back against the USD in November. ING said in its latest article that it thinks “markets are too bullish on Bank of England cuts.”

“The UK budget announcement on 30 October may have played a role in the hawkish sentiment, but even after the US election, expectations of a rate cut from the BoE have largely diminished,” ING wrote. If they are, could we see a slight correction in the GBP? When evaluating the GBP/USD chart, a turnaround in the current downtrend to 1.28 could be in play again.

Basic level:

• EURGBP: Higher – 0.8525, lower – 0.8200
• GBPUSD: Higher – 1.2800, lower – 1.2525

Japanese Yen (JPY)

USDJPY dipped in July and August before rebounding from September to mid-November. However, many believe it is still in an uptrend. Goldman Sachs said a return can note That Federal Reserve cuts and BoJ hikes (which were expected at the time) probably won’t provide that much support. As a result, they expected the yen to remain weak for the next 6 to 12 months. Recent moves in USDJPY indicate that earlier forecasts may be correct. However, over the past few days, the yen’s strength has once again hinted at a potential downside push. Bank of America recently said it maintains a bearish stance on USDJPY through 2025.

Basic level:

• USDJPY: High – 157.60, Low – 149.30
• EURJPY: High – 170.90, Low – 163.50

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