Market round-up: ECB cuts rates, NAS100 hits all-time high

• ECB cuts rates for 4th time in 2024

• EURUSD ↓ 1.050 psychological level

• Bloomberg FX model: EURUSD has 73% of trading within 1.0342 – 1.0626 over 1-week period

• NAS100 ↑ 4% MTD, pushing YTD gains to ↑ 29%

• Index technical levels – 22000, 21820, 21420

On Thursday 12th December, the European Central Bank announced its fourth interest rate cut of 2024.

This decision was widely expected with investors more concerned about any clues on future policy moves.

The ECB left the doors open for future rate cuts after dropping the reference to ‘restrictive’ monetary policy.

It also stated that disinflation was well on track, cutting inflation and growth forecasts for 2024-2026.

ECB President Christine Lagarde adopted a dovish tone during her press conference, suggesting that growth was losing momentum.

Given the negative risks to Europe in the form of potential tariffs and political instability - more rate cuts could be on the cards.

Traders have fully priced in a 25-basis point cut in January, March and April 2025 with the odd of another cut by June at 72%.

In response to the ECB rate decision, the EURUSD slipped below the psychological 1.0500 level. 

The prospect of lower interest rates in Europe has invited bears to the scene with prices trading below the 21-day SMA.

• Sustained weakness below 1.0500 may send prices toward 1.0420 in the near term.

• Should prices push back above 1.0500, this may trigger a move back to 1.0600.

Bloomberg’s FX model forecasts a 73% chance that EURUSD will trade within the 1.0342 – 1.0626 range, using current levels as a base, over the next one-week period.

 

NAS100 touches fresh all-time high

FXTM’s NAS100 rallied almost 2% yesterday (Wednesday 11th December), hitting a fresh all-time high at 21820. The Index has gained 4% month-to-date, pushing its 2024 gains to just over 29%.

US equity bulls welcomed the latest US inflation figures which sealed the deal for a December Fed cut. Consumer prices rose 0.3% in November for the fourth-straight month, while the core CPI rose by the same amount.

With inflation data matching forecasts, traders have fully priced in a 25-basis point cut by December with the odds of another cut by March 2025 at 76%.

Looking at the charts, the NAS100 is firmly bullish on the daily charts but the Relative Strength Index (RSI) is heavily overbought.

• A strong breakout above 21820 may open a path towards 22000.

• Should prices slip below 21420, this may encourage a decline to 21200.