Trading Focus: Fed Rate Cut, Bitcoin Record High

• Fed Rate Cut Expected: The Fed is likely to cut rates, but future cuts may slow in 2025 due to inflation and labor market resilience.
• Bitcoin Reaches Record High: Bitcoin surged above $107K, boosted by speculation of a U.S. crypto reserve and MicroStrategy’s Nasdaq 100 inclusion.
• China’s Uneven Recovery: Mixed economic data from China signals the need for more stimulus, with Moody’s slightly raising GDP growth expectations for 2025.

Fed Rate Cut Expected, But Caution Looms

A highpoint of the week will be the final meeting by the Federal Reserve in 2024, where a 25-basis point rate cut is largely expected by investors. That would be the third consecutive rate reduction, moving the central bank further toward easy money. With the cut priced in, attention is on Fed’s projection for 2025. The analysts expect a less aggressive pace of rate cuts during the upcoming year. Goldman Sachs analysts predict holding rates constant in January and additional cuts in March, June, and September.

However, with inflation still above target and the resilience of the labor market, the Fed might turn out to be more dovish. Other uncertainties, including political ones-particularly those resulting from a possible introduction of new trade tariffs in case a second Trump administration is confirmed, could also play into the hands of the central bank.

Bitcoin at New All-Time High Amid Strategic Reserve Talks

Surprisingly, Bitcoin reached an all-time high, extending above $107K this Monday, buoyed by speculation on the establishment of a US crypto reserve. The latest comments from President-elect Donald Trump regarding setting up a strategic reserve for Bitcoin — just like how the country holds an oil reserve — have given digital currency cause for optimism. This makes the U.S. an overnight world leader in crypto, and has thrown a buying frenzy that puts Bitcoin’s market cap at an eye-watering $2.11 trillion.

Bitcoin’s rally also got a boost from the addition of MicroStrategy to the Nasdaq 100, further improving investor appetites for the digital asset market. Up by more than 50% since Trump’s election, the price of the cryptocurrency is closing in on becoming the sixth-largest global asset by market volume and joining behemoths like Google.

China’s Uneven Economic Recovery Calls for More Stimulus

Economic data out of China over the weekend was mixed, showing an inconsistent recovery in the country’s economy. Industrial production came in as expected for November but retail sales missed estimates. Housing prices continued to slide downwards, also. The weakness in consumer spending and housing is likely to require new stimulus measures by Beijing to push growth.

Moody’s Ratings has upgraded its forecast of China’s GDP growth to 4.2% for the year 2025, revised from 4.0%, considering recent government stimulus and stabilization of credit conditions. With continued risks of a new Trump administration and the second wave of U.S. trade tariffs, however, recovery prospects remain uncertain. Targeted measures with more focus on consumption stimuli will be necessary in support of domestic demand.

Stock Market Outlook: Caution Pre-Fed-Decision

U.S. stock futures are only modestly higher as investors await a key policy decision from the Federal Reserve later this week. Yes, a rate cut has already been priced in, but on Wall Street, a soft week largely kept market sentiment cautiously upbeat. The Dow Jones Industrial Average is down almost 2% over that time span, marking its longest such losing streak since April.

Investors are more concerned with how the Fed’s new set of economic projections sets expectations for 2025. The week also contains the usual dose of preliminary PMI data, which will give further color on the state of the U.S. economy. Elsewhere, the attention is on MicroStrategy after its inclusion into the Nasdaq 100 likely to bring more money into the firm that holds a lot of Bitcoin.

Oil Slides as Chinese Demand Worries Offset Price Gains

Oil retreated on Monday, giving back some of its gains from last week, as the weak demand from China outweighed optimism from new EU sanctions on Russian oil. The International Energy Agency has warned that China’s oil demand is contracting, further dampening the outlook for global supply.

The crude markets are also preparing for the Fed’s meeting, where the central bank is expected to cut rates once more, but might also hint at a more guarded pace of cuts in 2025. U.S. crude futures edged down 1.5% at $70.28 per barrel, while Brent crude was down 0.7% at $74.00.

All in all, this week’s market dynamics are set by the upcoming policy meeting of the Federal Reserve, the dramatic rise of Bitcoin, and the uncertainty surrounding China’s economic recovery. With mixed economic data from China and a probable slowdown in the cutting of interest rates in the U.S., investors are moving through a complex landscape, balancing optimism with caution.

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