The World Cup 2022 has attracted worldwide attention and with a perfect conclusion. Argentina and France played a bravo final which was rare for many years, and the process is ever-changing. France tied twice in desperation, but they still lost in the 12-yard shootout, in the end, allowing Lionel Andrés Messi's dream to come true, while he has entered the twilight stage of his career. It is gratifying to win the only missing World cup Hercules Cup and become the well-deserved champion! 

With its World Cup season in the last month of this year, the financial market has not calmed down. The US dollar, which began to fall in November, continued to fall and even once fell to around 103.50. Investors ignored the Fed's still-holding firm stance on raising interest rates and responded positively to the news of falling inflation instead. It was not until the Federal Reserve reiterated that it would continue to raise interest rates after the December interest rate meeting, that the dot plot also showed that the final interest rate is still likely to be higher than 5%. However, the temporary rebound is still insufficient, and it does not yet regain the 20SMA. I believe that the Fed is not too optimistic about the slowdown of inflation and is more worried about the consequences of withdrawing restrictive actions prematurely. The economic growth in the third quarter was revised upwards from the original 2.9% to 3.2%. In addition to the fact that the labour market is still stable, believed that the interest rate hike cycle is far from over, and the US dollar should have some support around 103.50.  

The European Central Bank and the British Central Bank also raised interest rates by 0.5% in December, but their future policy stances are different. It is estimated that the European Central Bank will continue to maintain a tough rate hike. The Bank of England began to have a different opinion, with two members supporting keeping interest rates unchanged. While still a minority, a prolonged recession seems inevitable for the economy. In addition to the previous tight budget, the central bank may have to take a more balanced approach. If the US dollar rebounds, you may consider selling the British pound. The resistance at 1.2250 is strong.  

The Bank of Japan maintained the interest rate after the interest rate meeting but allowed the fluctuation range of the 10-year government bond yield to increase from the previous fluctuation of 0.25% to 0.5% unexpectedly. The market believes that the adjustment is small but significant, which means the central bank has begun reviewing the entire monetary policy.  

At present, the local core inflation has rebounded to 3.7%. After Haruhiko Kuroda leaves office next year, the policy may have further adjustments. The yen once rose to around 130.50 against the US dollar. I believe that if the Bank of Japan confirms to change of its long-standing ultra-loose monetary policy, it will have a major impact on the long-term trend of the yen. However, there may not have another adjustment again in the short term. In addition, the United States will continue to raise interest rates, and the spread between the US and Japanese treasury bonds will remain for a while. The yen has also rebounded sharply by more than 10% from 152. It may not be able to rise above 130 in the short term. Therefore not recommend not to chase high.

Patrick Law

General Manager of Hantec Group