The recovery in risk appetite continues since last Friday's release of US PCE data, which came in lower than anticipated. Most major equity indices have traded higher in recent hours.

The rally, sparked by the lower-than-expected US PCE Price Index (the Fed's preferred inflation gauge), has carried over into today. Since the Tokyo market opened, indices such as the HSI, NASDAQ 100, and S&P 500 have all posted gains. Market sentiment suggests that the next Federal Reserve rate cut is unlikely to occur before March 2025.

Forex Market Update

In the Forex market, trading has been subdued following the Tokyo open as the holiday season approaches. The EUR/USD pair remains entrenched in a long-term bearish trend, having seen a sharp drop after the recent Fed meeting. It is currently hovering near a multi-year low above $1.0300. Meanwhile, meeting minutes from the Bank of Japan and the Reserve Bank of Australia have had minimal impact on the respective currencies, offering no major surprises. However, the RBA hinted at increased confidence in managing inflation, which could point to a potential rate hike in early 2025.

Other Economic News

  • Canada's GDP Data: Canada's GDP data released yesterday exceeded expectations, showing a monthly growth of 0.3% against a forecasted 0.2%.
  • US Treasury Yield: The 10-year US Treasury yield hit a six-month high yesterday, surpassing 4.599%. While trend traders might find this rate appealing for long positions, many analysts argue it is unlikely to sustain such a level over a decade.

Cocoa Futures

Cocoa futures recently achieved an all-time high, just shy of $13,000 per ton, before experiencing a slight pullback in recent days. The commodity has seen remarkable growth, with a 40% increase in value over the past few weeks. Traders will recall the extraordinary rally of 2023 when Cocoa prices tripled within 4–5 months.

Trend traders might be eyeing Cocoa futures, though the smallest available position is $100,000. Retail traders can consider the Cocoa exchange-traded commodity (ETC) listed on the London Stock Exchange under the ticker COCO, which tracks the Bloomberg Cocoa Sub Total Return Index (BCOMCCTR).