As expected, FOMC cut interest rate. The Bank of Canada keeps the rate unchanged at 2.25%

The US stock indices rose on Wednesday in reaction to the FOMC decision and Powell’s comments. The Dow Jones Index (US30) rose by 1.05%. The S&P 500 Index (US500) gained 0.67%. The technology-heavy Nasdaq Index (US100) closed higher by 0.33%. The Fed cut the rate by 25 basis points and maintained its expectations for one more cut next year. However, Powell’s remarks on whether to end the cycle or cut rates “a little” or “more than a little” bolstered expectations for further easing: the market prices the probability of two or more cuts in 2025 at approximately 68%. Industrial companies performed the best. In corporate news, Amazon stock stood out, rising 1.7% after announcing a $35 billion investment in India, and JPMorgan, which added 3.2%. Microsoft, conversely, fell by 2.8% amid reports of plans to invest $17.5 billion in India over the next four years.

The Canadian dollar strengthened above $1.38 per US dollar, reaching a twelve-week high, driven by a combination of softer Fed rate expectations and the Bank of Canada’s (BoC) hawkish stance, underpinned by strong domestic data. The BoC kept its rate unchanged at 2.25% and signaled that it views the current policy as adequate, citing unexpectedly strong Q3 GDP growth (2.6% y/y) and a tight labor market with unemployment around 6.5%. All of this reduces the likelihood of imminent policy easing and supports the Canadian currency.

European stock markets traded mixed on Wednesday. The German DAX (DE40) fell by 0.13%, the French CAC 40 (FR40) closed lower by 0.37%, the Spanish IBEX 35 (ES35) gained 0.17%, and the British FTSE 100 (UK100) closed up by 0.14%. In France, the approval of the social budget reduced short-term political uncertainty, giving the euro additional support, although key risks remain during the discussion of the overall state budget. In Switzerland, the rate is expected to remain unchanged at 0%, and market attention shifts to next week’s ECB meeting, where the regulator is expected to keep the rate at 2% until at least 2026, given that inflation and growth align with current prognoses.

WTI crude oil prices dropped to $58 per barrel on Thursday, partially reversing the gains of the previous session: the market is balancing geopolitical risks against persistently bearish fundamental expectations. The US interception of a sanctioned tanker off Venezuela and a Ukrainian attack on a vessel from the “shadow fleet” linked to Russian oil trade increased fears of supply disruptions and added to the risk premium. However, these factors are offset by prognoses of a supply glut: growth in production by OPEC+ and allies is expected to exceed weak global demand. Investors await fresh reports from OPEC and the IEA, which may clarify market balance expectations. Meanwhile, US government data showed a reduction in commercial crude oil inventories by 1.8 million barrels.
The price of silver climbed above $61.8 per ounce, continuing its record rally following the Fed’s 25 basis point rate cut and Powell’s comments, which were perceived as dovish by the markets. This weakened the dollar and reduced the opportunity cost of holding the metal. Additional support was provided by severe physical market constraints: inflows into ETFs and spot demand have increased this year, Asian and Indian demand remains high, and the shortage of available metal has led to rising lease rates and borrowing costs for silver.

Asian markets traded mixed yesterday. The Japanese Nikkei 225 (JP225) fell by 0.10%, the Chinese FTSE China A50 (CHA50) dropped by 0.61%, the Hong Kong Hang Seng (HK50) rose by 0.42%, and the Australian ASX 200 (AU200) showed a positive result of 0.72%.

The Australian dollar retreated on Thursday after the release of weak labor market data: the economy unexpectedly lost 21.3 thousand jobs in November, the largest drop in nine months, with the decline concentrated in full-time employment, and labor force participation weakened, which kept unemployment at 4.3%. This data reinforced signs of a gradual cooling in the labor market and shifted expectations for an RBA rate hike to the second half of 2026 instead of May. However, the regulator still assesses the labor market as tight, pointing to a high level of vacancies and rising labor costs.