Market Highlight 19.12.2024
The U.S Federal Reserve (FED) has signaled a slowdown in its rate-cutting process for 2025 following the conclusion of its December policy meeting. The FED also announced a 0,25% reduction in the benchmark interest rate during this meeting, with 11 out of 12 members voting in favor. This move brings the rate to its lowest level in 2 years. Having reduced interest rates by a full 1% since September, the FED projects only two rate cuts in 2025, tentatively scheduled for March and June. Chairman Jerome Powell remarked during the post-meeting press conference: "From here, it’s a new phase, and we’re going to be cautious about further cuts." The FED appears to be allowing more time to assess the potential impacts of the new administration’s policies on tariffs and immigration in the coming year. While U.S inflation has declined sharply since mid-2023, it has shown signs of rebounding over the past two months. Moreover, the labor market has not exhibited the significant weakness the FED anticipated when it initiated monetary easing in September. In response to the FED’s announcements, the Dow Jones Industrial Average plummeted by over 1.100 points (2,6%), marking its 10th consecutive decline - the longest losing streak in 50 years. The S&P 500 dropped nearly 3%, while the Nasdaq Composite slid by 3,6%.
The USD Index climbed to a two-year peak of 108,26 last night following the FED’s rate cut and its indication of a slower pace of monetary easing moving forward. Domestically, the interbank USD/VND exchange rate hovered near the State Bank of Vietnam’s (SBV) USD intervention selling price of 25.450 throughout yesterday, pressured by the global surge in the USD. The 25.450 level is expected to remain a critical upper limit for the market, especially as external pressures intensify toward the end of 2024.
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