December 2023 Wrap Up

What were the key moments in the market this month?

Fed freezes rates and teases future cuts in 2024

For the third consecutive time, the Fed maintained its key interest rate, buoyed by a backdrop of improving conditions where inflation was easing. Every member of the committee was in accord regarding maintaining the benchmark overnight borrowing rate within the specified range of 5.25% to 5.5%.

Additionally, the committee also outlined intentions for at least three rate cuts in 2024, each likely to be a quarter percentage point smaller. However, this was less than what the market expected but more aggressive than what officials had hinted before.

Japan keeps tabs on the currency scene

Japan’s finance minister, Shunichi Suzuki, emphasised their close monitoring of currency market shifts following Fed Chair Jerome Powell’s indication of potential rate cuts in the coming year. “I won’t comment on every single day-to-day currency market move,” Suzuki added. “Our basic stance is that it is desirable for currencies to move stably reflecting fundamentals.”

Last October, Japan intervened by selling dollars for yen when the yen dropped to nearly 152 per dollar. Typically, Tokyo intervenes by buying dollars and selling yen to prevent the Japanese currency’s strength from undermining exports.

BoE’s rates stay sky-high

The Bank of England is holding firm with its interest rates at a 15-year high, aiming to rein in inflation and hit that 2% target. Sarah Breeden, the deputy governor of the Bank of England, reminded everyone to tread carefully even as things improve on the inflation front. 

Referring to the next vote on rates by the Monetary Policy Committee (MPC), she said in a speech: “I will approach each vote humbly and pragmatically, with no pre-determined policy path in mind.” Above all, Breeden clarified that understanding wage growth and employment patterns will play a pivotal role in her decision-making.

India rules the stocks: Climbs to 7th in global market

India’s stock market surpassed Hong Kong’s, snagging the seventh spot worldwide and sparking more hope about India’s economic future. By November’s close, India’s National Stock Exchange clocked in at a whopping $3.989 trillion market value, just ahead of Hong Kong’s $3.984 trillion. Moreover, the Nifty 50 index in India hit an all-time high, riding a 16% surge this year and eyeing an eighth year of winning streaks, while Hong Kong’s Hang Seng index took a 17% tumble. 

Without a doubt, India has shone brightly in the Asia-Pacific market this year. All thanks to a greater cash flow, increased local involvement, and positive shifts in the global financial scene, especially with the decline in U.S. Treasury yields.

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