Daily commentary & market insights, December 19, 2024

The Federal Reserve announced a hawkish rate cut of 25 basis points yesterday, they also forecasted fewer cuts in 2025, down to 2 from the initial 4 expected.  This decision and guidance sent ripples through the North American Foreign Exchange (FX) market, prompting immediate reactions among major currencies and equity markets.  The Fed’s decision came amid persistent concerns about inflation and the potential for an economic slowdown.  As a result, the U.S. dollar experienced immediate volatility, soaring against major currencies. Currency pairs such as the EUR/USD and USD/CAD saw notable movements, with the Euro losing approximately 1.17% against its U.S. counterpart.  The Canadian dollar lost nearly .90%.  AUD & NZD lost approximately 1.7%.  Today, the CAD & EUR dollars have recovered slightly from yesterday’s announcement.  For exporters and importers, this shift could mean revisiting pricing strategies and hedging/risk management practices.  Safe-haven assets also shed ground against the USD.  The USD/JPY pair is near a fresh December high, while Gold fell below the $2,600 mark for the first time this month.  The Federal Reserve’s recent decision has undeniably influenced the North American FX market, creating both opportunities and challenges for International Businesses. As companies brace for potential shifts in currency values, strategic planning and risk management will be essential in navigating these turbulent waters. Staying informed and agile will be key for businesses aiming to leverage the current economic climate to their advantage.