In their final monetary policy meetings of 2024, most of the world's major central banks continued their rate-cutting cycles. The central banks of Switzerland, Canada, and New Zealand made substantial cuts of 0.5%, while the European Central Bank (ECB) and the Federal Reserve lowered rates by 0.25%. In contrast, the central banks of the UK, Australia, and Japan kept rates unchanged. Among them, the Reserve Bank of Australia has yet to start easing its monetary policy, while the Bank of Japan has paused its tightening policy, diverging from the broader policy direction of other central banks.

Although the Federal Reserve reduced rates by 0.25% as expected, Chair Jerome Powell emphasized the need for caution in further rate cuts until there is clear progress in lowering inflation. The Fed's dot plot also indicated a reduced expectation for rate cuts in 2025, from four cuts down to two. The market interpreted December's move as a "hawkish rate cut," leading the U.S. Dollar Index to surge past the 108 level.

Recent U.S. economic data has been largely positive. Third-quarter GDP growth was revised upward to 3.1%, November retail sales increased by 3.8% year-on-year, and both the labor market and consumer confidence remain robust. However, manufacturing data continues to disappoint. Relative to other economies, though, the U.S. maintains a strong fundamental advantage.

Canada and New Zealand have each cut rates by 0.5% in consecutive meetings, reflecting the urgent need for monetary support amid weak economic conditions. The ECB, wary of the slowing pace of inflation decline, refrained from making significant rate cuts, but the eurozone’s economy remains lackluster. Manufacturing PMI remains in contraction territory, and growth is weak. Political uncertainty compounds economic concerns. Germany and France, the two leading EU economies, have seen political upheaval. Germany is set to hold early elections in February, and while France has appointed a new prime minister, public approval is low, leaving President Macron’s political future in jeopardy.

In recent years, far-right parties have been on the rise across Europe. Italian Prime Minister Giorgia Meloni has transformed from a skeptical figure to one of Europe’s most popular leaders. Meanwhile, the return of Donald Trump to the U.S. political scene has further bolstered the momentum of far-right movements. Should Germany and France both end up with far-right governments, the stability of the European Union will face significant challenges. The euro, under dual pressure from political and economic instability, may test parity against the dollar.

The year 2025 is expected to be marked by great uncertainty. Following Donald Trump’s inauguration on January 20, his specific policies will become clearer, potentially bringing major shifts in areas like trade tariffs, geopolitics, and international relations. Whether "Make America Great Again" is merely a campaign slogan or a realizable vision will soon be revealed.

Financial markets are likely to remain volatile, and gold remains a worthwhile investment at lower levels, with $2,500 per ounce being a favorable entry point. In the short term, the U.S. dollar is expected to stay strong. Over the past two years, its trading range has been between 100 and 107; however, this range may now be adjusted upward to 105–111.

Patrick Law

Chief Operating Officer of Hantec Group