S&P Hits Records, Bitcoin Swings, and FX Focuses on Fed and ECB Policy | Daily Market Analysis

Key events:

• Eurozone - Eurogroup Meetings

Stocks gained momentum on Friday, buoyed by November’s employment report that met market expectations, reinforcing optimism about the economy’s resilience. The data bolstered speculation of an impending Federal Reserve rate cut, contributing to a mixed day across equity markets. The S&P 500 rose 0.3%, while the Nasdaq Composite gained 0.8%, both achieving record highs. In contrast, the Dow Jones Industrial Average closed 0.3% lower, relinquishing earlier gains due to key stock declines.

The Dow saw a roughly balanced session, with half of its listed companies posting gains. However, losses among certain heavyweights dragged the index lower. Amazon (AMZN) stood out, surging 3% to over $227 per share, marking another all-time high for the e-commerce giant. Its strong performance was insufficient to offset the drag from weaker components, underscoring the mixed sentiment across the broader market.

The latest nonfarm payrolls report revealed a solid recovery, with 227,000 jobs added in November, slightly exceeding the forecast of 220,000. This marked a sharp rebound from October’s downwardly revised figure of 36,000. However, the unemployment rate edged higher to 4.2%, as expected, up from the prior month’s 4.1%. While the robust job creation reassured investors, the increase in unemployment capped bullish momentum, keeping equity markets cautiously optimistic.

Cryptocurrency markets also drew attention, with Bitcoin rebounding to $100,400 by late Friday afternoon after dipping to $98,000 earlier in the day. Despite this recovery, the digital asset remained below its record high of $104,000, set just days earlier on Wednesday. Bitcoin has rallied approximately 40% since the US presidential election, fueled by investor optimism that a pro-crypto policy environment under a Trump administration could spur further adoption and regulatory clarity for the sector.

In the forex market, the Japanese Yen struggled to gain ground against the US Dollar during Monday’s Asian session. Although Japan’s GDP for the third quarter received an upward revision, doubts about whether the Bank of Japan would pursue further rate hikes in December weighed on the currency. A slight recovery in the USD added to the pressure on the Yen, keeping the USD/JPY pair trading within a narrow range. Geopolitical uncertainties and declining US Treasury yields, however, tempered the Yen’s losses, making traders hesitant to place aggressive bets on either side of the pair.

The EUR/USD pair also saw muted movement, trading with a slight bearish bias near 1.0550 during Asian hours on Monday. Investors were focused on the European Central Bank policy meeting scheduled for Thursday. Markets widely expect the ECB to announce its fourth rate cut of the year, reducing borrowing costs to support the Eurozone economy. ECB President Christine Lagarde’s press conference following the decision will be closely watched for insights into the central bank’s future policy trajectory, with any dovish remarks likely to weigh on the Euro.

The British Pound began the week on a subdued note, with the GBP/USD pair oscillating below the mid-1.2700s. Despite reaching a three-week high above 1.2800 on Friday, the pair struggled to maintain upward momentum. Market sentiment remained cautious due to the Bank of England’s dovish outlook, as Governor Andrew Bailey signaled four potential rate cuts in 2025. Traders are now awaiting US inflation data, set to be released on Wednesday, for clues about the Federal Reserve’s next moves.

Inflation is expected to play a pivotal role in shaping central bank policy decisions in the coming weeks. Analysts forecast a rise in the annual US Consumer Price Index (CPI) to 2.7% in November from 2.6% in October, while core inflation is projected to remain steady at 3.3%. A higher-than-expected CPI reading could challenge the Federal Reserve’s anticipated rate cut at its December meeting. However, current market sentiment suggests a strong likelihood of a quarter-point reduction, bringing rates to a range of 4.25% to 4.5%.

In Europe, the ECB’s decision on Thursday will dominate headlines. While markets expect a rate cut, the central bank is likely to maintain its data-dependent guidance. ECB policymakers’ comments, particularly from President Lagarde, could have significant implications for the Euro’s trajectory in the weeks ahead.

Amid these developments, traders will also monitor speeches from key central bank officials, including BoE Deputy Governor David Ramsden on Monday. His remarks could provide fresh insights into the Pound’s direction as markets brace for further clarity on monetary policy.