Lots of balls in the air traffic markets with the US government getting into the act today.

In the video above, I focus on the technical that drives the three major currency pairs – The EURUSD, USDJPY, and the GBPUSD. The markets are dealing with the possibility of a US government shutdown and the hangover from the Fed BOE and BOJ rate decisions.

For US stocks, it is not the Fed today, but the US government that is responsible for the sharp drop in stocks in pre-opening trading. The House voted on a spending proposal plan that would stop the government shutdown, but that vote failed miserably.

In summary:

• An attempt by House Republicans to end the government shutdown failed in a vote on Thursday, with 174 votes in favor and 235 against, falling short of the required two-thirds majority and even a simple majority. The proposal, backed by President-elect Donald Trump, sought to fund the government for three months, provide more than $100 billion in disaster relief and farm aid, and the loan limit that suspended for two years, while removing provisions on investments in China, 9/11 health care funds, and pharmacy benefit manager regulations. The opposition included 38 GOP fiscal hardliners and most Democrats, marking an obstacle for Trump and House Speaker Mike Johnson. If no deal is reached by midnight Saturday, a partial government shutdown will begin, affecting hundreds of thousands of federal workers.

The original plan proposed by both parties in the House was rejected by Elon Musk on X and that led to its deletion and the new proposal.

Although the sky is falling, the process will start again, and hopefully, although there may be closure, there is likely to be an agreement at some point. What is clear is that the re-elected President Trump (along with Elon Musk) will crack the whip to tell all parties who is in charge. That means domestically and internationally.

US stocks have moved significantly lower with futures currently (7:44 AM ET) meaning:

• The Dow industrial average fell -265 points. The index barely broke the 10-day down streak yesterday with a gain of
• S&P index futures imply a decline of -58 points
• NASDAQ futures mean a sharp drop of -330 points

US output is moving lower with the following:

• 2 years at 4.278% or -4.1 bps
• 5 years at 4.380%, -4.8 bps
• 10 years at 4.542%, -2.8 bps
• 30 years at 4.735%, -0.7 bps.

Meanwhile, back at the Fed, SF Pres. Mary Daly who has been a sounding board for the Fed's Powell in the past, just finished commenting on business news saying:

• That monetary policy decisions are based on data, not influenced by the incoming administration. She described the current policy position as well-positioned to deal with upcoming challenges and noted that inflation has been progressing more slowly than expected, creating a “bumpy path”. Daly pointed out that the Fed has moved beyond the recalibration phase after the recent 100bps rate cuts, which she considered appropriate. While rate cuts are expected in 2025, the exact number will depend on incoming data. She raised confidence in the labor market, citing tough economic conditions where companies can find workers, and the Fed aims to avoid that stability. Daly acknowledged uncertainty around a neutral interest rate and inflation projections but said the Fed is working toward a soft landing. She does not expect a rate hike in 2024 but stressed that it is still an option if necessary, as the Fed continuously evaluates its tools to maintain economic balance.

Looking at other global monetary policy news, the ECB's Chief Economist, Philip Lane, said that the European Central Bank will only need to maintain a tight monetary policy stance if the inflation trend is above 2%. However, he noted that current signs indicate that inflation is moving closer to the 2% target, reducing the need for austerity measures.

Japan's finance minister Kato shot down a view over the bow regarding possible JPY intervention after it fell sharply by expressing concern over its recent one-sided and sharp movements. move in a sustainable manner that reflects economic fundamentals. Kato said the government would take appropriate measures against excessive or speculative movements, highlighting the sharp weakening of the yen this week as a major concern.

The USD is mostly lower but the GBP, CAD, AUD and NZD are all flat with changes of 0.12% or less: