Recently, there has been a lot of ups and downs in the financial markets, especially after Trump won the US presidential election and the Republicans gained control of Congress. Good news comes from the latest reports showing the US economy is doing well, but inflation could be a problem. People wonder if the Federal Reserve (the US bank) will cut interest rates at their upcoming meeting in December. Right now, many believe there is an 86% chance that the Fed will lower rates, up from 64% last month.
Meanwhile, the economies in Europe and China are struggling. The European Central Bank is likely to lower rates soon, and China may introduce more money to help its economy in early 2025. There is a chance that Japan’s central bank might not raise rates next week. Because of these differences in economic health, the US dollar is getting stronger against other currencies.
President-elect Trump has also warned that if BRICS countries (Brazil, Russia, India, China, and South Africa) create a common currency, they might lose access to US markets, which could hurt their currencies. The Chinese Yuan is getting weaker, but China’s central bank is trying to stabilize it. The Indian Rupee is doing a bit better than other Asian currencies because the Reserve Bank of India (RBI) is stepping in to help. However, it’s still declining against the dollar after a poor GDP report.
The RBI has lowered growth predictions and increased its inflation estimates. They have cut the Cash Reserve Ratio (CRR) by 0.5% to help banks. With a new RBI governor, many think a rate cut is coming soon. This could put pressure on the Rupee, but the government’s goal of reducing its budget deficit means that monetary policy may have to shift to support growth.
On a brighter note, foreign investments in Indian stocks have bounced back in December after two months of money leaving the market. This has helped the Nifty index recover about 6% from its lows. There are hopes for interest rates and bonds to go down further, creating a potential exit point for investors.
In summary, the financial market’s ups and downs since Trump’s election might continue as he takes office. It seems like a calmer period is behind us.
(Disclaimer: The views expressed here are personal opinions and do not represent the views of NiftyStat.)
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