On Friday (December 20th), Asian stock markets hit a three-month low as investors awaited key US inflation data that could ease or exacerbate concerns about sustained high price pressures, while the US dollar climbed to a two-year high.

In Asia, the MSCI Asia (excluding Japan) most widely used index fell 0.6%, hitting a three-month low, and is expected to drop 3% this week.

The Nikkei 225 index in Japan remained unchanged, but fell 1.7% this week. Despite this, the index has risen 16% year to date, partly due to the weakness of the yen, which depreciated by 12% in 2024, and the Japanese authorities continuously issuing intervention warnings.

Chinese blue chip stocks and Hong Kong Hang Seng Index rose slightly by 0.2%. The People's Bank of China kept the benchmark lending rate unchanged on Friday, in line with market expectations.

European stock markets are expected to open lower, with EUROSTOXX 50 futures falling about 1%. Nasdaq futures fell 0.6%, while S&P 500 futures fell 0.3%.

The highly anticipated inflation indicator for the United States, the Core Personal Consumption Expenditure (PCE) data, will be released later that day. It is expected that the month on month growth in November will be 0.2%. If the data unexpectedly rises, it may lead to further reduction of market expectations for policy relaxation in the United States.

Investors are also concerned about the upcoming US government shutdown, and even some Republicans do not support President elect Trump's massive spending plans. The government faces the risk of a possible shutdown on Saturday, and this debate has exposed rifts within Trump's Republican Party that may resurface next year.

The tariffs, tax cuts, and large-scale spending policies proposed by Trump are part of the reason why the Federal Reserve is cautious about cutting interest rates next year. The market now expects the Federal Reserve to cut interest rates less than twice next year, with a terminal rate of 3.9%, much higher than expectations from a few months ago. This prospect has placed heavy pressure on the US treasury bond bond market. The yield of benchmark 10-year treasury bond bond has risen 40 basis points in the past two weeks, breaking the key level of 4.5% for the first time, the highest point since May.

It is evident that the central bank is very concerned about the geopolitics and uncertainty of 2025, "said James Rossiter, Global Macro Strategy Head at TD Securities." Ultimately, uncertainty will remain at a high level, policy shocks will be more significant, and the market may be more volatile than ever before. 2025 will be a rollercoaster ride

After a year full of central bank policy decisions, the central banks of the UK, Japan, Norway, and Australia maintained their policies unchanged, Switzerland and Canada lowered their policy rates by 50 basis points each at their final meeting at the end of the year, and the Swedish central bank and ECB also lowered their policy rates by 25 basis points each.

All these factors have led to the strengthening of the US dollar against major currencies, standing at a two-year high of 108.43 and enjoying an interest rate advantage.

The USD/JPY remained stable at a five month low of 157.11. The Bank of Japan kept interest rates unchanged, and Governor Kazuo Ueda made dovish remarks, stating that it would take some time to assess the wage outlook and the impact of Trump's policies, leading to a 1.7% drop in the yen overnight.

Data shows that Japan's core inflation accelerated in November, but the market still tends to believe that the Bank of Japan will maintain policy unchanged in January, with a probability of 58%.

The EUR fell 1.4% this week and is currently trading at $1.0360, facing a key support level of $1.0331.

The US treasury bond bond market is expected to suffer losses for the fourth consecutive year. The yield of 10-year treasury bond has risen by 70 basis points this year. This week, it rose by 16 basis points, reaching 4.56%.

Due to the strengthening of the US dollar, the commodity market has also been hit. Oil prices fell on Friday, with WTI crude oil in the United States falling 0.6% to $68.98, down 2.8% this week. The price of gold is also expected to fall by 2% this week, currently trading at $2595.