With Trump's return approaching, the situation in some regions with unstable political situations is becoming tenser. The transition of the Biden administration has created a vacuum in maintaining stability. The vested interests intend to expand their influence before the new US administration takes office. From now until Trump takes office, the geopolitical risks cannot be underestimated.
First, let's focus on the situation in Syria! The crisis of the Syrian civil war has intensified. After the "Syrian Liberation Army" overthrew the Assad regime, although the transitional government took over, due to the complex domestic factions and the precarious situation, coupled with continuous external military interventions, the market is worried about the escalation of geopolitical risks, which endangers the energy supply from the Middle East to Europe. Israel's actions in Syria have worsened the surrounding relations. If the regional turmoil intensifies and leads countries like Iran to participate in the war, the situation will be severe. On the Russia-Ukraine battlefield, the Russian army has controlled parts of the Kursk region, and the fighting is fierce. The Russian air force has carried out air strikes on the Sumy and Chernihiv regions, and a large number of civilians have been affected. The market is focusing on whether Russia will use weapons of mass destruction, and the risk of a nuclear crisis has drawn attention.
The Federal Reserve's December interest rate meeting is naturally the biggest focus in the market. The CME fedwatch predicts that the probability of the Federal Reserve cutting interest rates by 25 basis points in December is over 90%. According to its usual practice, there is little suspense about this interest rate cut this time. Currently, the focus has shifted to the extent of the Federal Reserve's interest rate cuts and expectations in 2025. The key lies in the changes in the dot plot and the comparison with the expectations of the swap market. Comparing the recent dot plot results, if the new expectations reflect that the median of the dot plot in 2025 remains at 3.4%, that is, Federal Reserve officials expect continuous interest rate cuts, it is expected that the US dollar will be under pressure and the gold price will be supported. On the contrary, if the new dot plot expects the median interest rate in 2025 to rise to 3.75% or above, that is, the interest rate cut expectations are hit, there is a high chance that the US dollar will be supported and the gold price will be under pressure. Meanwhile, Powell's speech and the announcement of the US PCE price index will also affect market expectations and the trends of the US dollar and gold prices.
Beside, the decisions of the Bank of England and the Bank of Japan are also attracting attention. The market is exploring whether there will be a situation where the Federal Reserve is hawkish while non-US central banks are dovish in terms of capital flows, which would support the strength of the US dollar. The Bank of England is expected to keep interest rates unchanged, so the focus is weak and the market movement is light. If there is an unexpected interest rate cut or dovish remarks, non-US currencies such as the British pound will be under pressure. On the contrary, the Bank of Japan has many highlights. Bank of Japan officials have frequently hinted at raising interest rates. However, given Japan's government debt situation, it is difficult to continue raising interest rates. Therefore, the current move by the Bank of Japan at the end of the year may be to stabilize the yen, help companies with year-end settlements, and support the peak tourist season. In terms of operations, pay attention to its final actions, the governor's speech, and the market reaction. In addition, the inflation and employment data of many non-US countries will be released, which will also affect market conditions.
Before the long Christmas and New Year holidays, the risk of index fund withdrawals needs to be vigilant. In 2024, stock indexes have repeatedly hit new highs. With the uncertainty of Trump's taking office and the intensification of geopolitical risks, if there are withdrawals and pullbacks in stock indexes, the US dollar will mostly strengthen and the gold price will often be hit.
By Wayne Lai
A senior financial practitioner in Hong Kong. He has served well-known financial public relations firms, financial media, and investment banks. Past service targets include Societe Generale, CMC Markets, KVB Kunlun, etc. At the same time, he is a part-time lecturer at colleges and universities, a regular guest of financial media, and an author of financial readings. He has represented Hong Kong to attend world financial forums many times. Currently, he is the research and marketing director of Royal Capital. Over the years, he has won multiple industry awards for service institutions.
Disclaimer: The content of this article is for reference only and does not constitute an offer, recommendation, or inducement for any person to submit an offer to buy or subscribe for any securities. The price of structured products can rise or fall sharply, and investors may suffer total losses. Past performance does not reflect future performance. Before investing, investors should understand the risks and consult professional advisors and refer to relevant listing documents. Nothing in this article constitutes investment, legal, accounting or tax advice, and there is no statement that any investment or strategy is suitable or in line with your individual circumstances.
First, let's focus on the situation in Syria! The crisis of the Syrian civil war has intensified. After the "Syrian Liberation Army" overthrew the Assad regime, although the transitional government took over, due to the complex domestic factions and the precarious situation, coupled with continuous external military interventions, the market is worried about the escalation of geopolitical risks, which endangers the energy supply from the Middle East to Europe. Israel's actions in Syria have worsened the surrounding relations. If the regional turmoil intensifies and leads countries like Iran to participate in the war, the situation will be severe. On the Russia-Ukraine battlefield, the Russian army has controlled parts of the Kursk region, and the fighting is fierce. The Russian air force has carried out air strikes on the Sumy and Chernihiv regions, and a large number of civilians have been affected. The market is focusing on whether Russia will use weapons of mass destruction, and the risk of a nuclear crisis has drawn attention.
The Federal Reserve's December interest rate meeting is naturally the biggest focus in the market. The CME fedwatch predicts that the probability of the Federal Reserve cutting interest rates by 25 basis points in December is over 90%. According to its usual practice, there is little suspense about this interest rate cut this time. Currently, the focus has shifted to the extent of the Federal Reserve's interest rate cuts and expectations in 2025. The key lies in the changes in the dot plot and the comparison with the expectations of the swap market. Comparing the recent dot plot results, if the new expectations reflect that the median of the dot plot in 2025 remains at 3.4%, that is, Federal Reserve officials expect continuous interest rate cuts, it is expected that the US dollar will be under pressure and the gold price will be supported. On the contrary, if the new dot plot expects the median interest rate in 2025 to rise to 3.75% or above, that is, the interest rate cut expectations are hit, there is a high chance that the US dollar will be supported and the gold price will be under pressure. Meanwhile, Powell's speech and the announcement of the US PCE price index will also affect market expectations and the trends of the US dollar and gold prices.
Beside, the decisions of the Bank of England and the Bank of Japan are also attracting attention. The market is exploring whether there will be a situation where the Federal Reserve is hawkish while non-US central banks are dovish in terms of capital flows, which would support the strength of the US dollar. The Bank of England is expected to keep interest rates unchanged, so the focus is weak and the market movement is light. If there is an unexpected interest rate cut or dovish remarks, non-US currencies such as the British pound will be under pressure. On the contrary, the Bank of Japan has many highlights. Bank of Japan officials have frequently hinted at raising interest rates. However, given Japan's government debt situation, it is difficult to continue raising interest rates. Therefore, the current move by the Bank of Japan at the end of the year may be to stabilize the yen, help companies with year-end settlements, and support the peak tourist season. In terms of operations, pay attention to its final actions, the governor's speech, and the market reaction. In addition, the inflation and employment data of many non-US countries will be released, which will also affect market conditions.
Before the long Christmas and New Year holidays, the risk of index fund withdrawals needs to be vigilant. In 2024, stock indexes have repeatedly hit new highs. With the uncertainty of Trump's taking office and the intensification of geopolitical risks, if there are withdrawals and pullbacks in stock indexes, the US dollar will mostly strengthen and the gold price will often be hit.
By Wayne Lai
A senior financial practitioner in Hong Kong. He has served well-known financial public relations firms, financial media, and investment banks. Past service targets include Societe Generale, CMC Markets, KVB Kunlun, etc. At the same time, he is a part-time lecturer at colleges and universities, a regular guest of financial media, and an author of financial readings. He has represented Hong Kong to attend world financial forums many times. Currently, he is the research and marketing director of Royal Capital. Over the years, he has won multiple industry awards for service institutions.
Disclaimer: The content of this article is for reference only and does not constitute an offer, recommendation, or inducement for any person to submit an offer to buy or subscribe for any securities. The price of structured products can rise or fall sharply, and investors may suffer total losses. Past performance does not reflect future performance. Before investing, investors should understand the risks and consult professional advisors and refer to relevant listing documents. Nothing in this article constitutes investment, legal, accounting or tax advice, and there is no statement that any investment or strategy is suitable or in line with your individual circumstances.
