A December Fed cut is back as a baseline scenario for markets, but the dollar has remained relatively strong. Our short-term valuation metrics point to significant risks of a USD correction, unless data prompts a hawkish repricing. Geopolitics will remain in focus, both for European FX (Ukraine peace talks) and the yen (Japan-China tensions over Taiwan)
The federal government has unveiled a new agreement to finalise the 2026 budget and outline the main direction for economic policy in the coming years. While these steps will help reduce the public deficit, further action will be necessary to stabilise the debt ratio
Buoyant economic growth and signs of recovering investment are paired with slowing wage dynamics, easing upside risks to the current disinflation trend. With CPI inflation approaching the National Bank of Poland's target, the central bank may continue with policy easing. We expect another 25bp rate cut in December
With dropping expectations and an only somewhat improving current assessment, the November Ifo index suggests that the German economy remains deeply stuck in stagnation at year-end
The week draws to a close on a positive note after a significant selloff in risk assets as US rate cut bets continued to decline from the Federal Reserve's December meeting.
This week, we should see more economic data from the region after a rather quiet last week.
We've been here before, but prospects of a peace deal in Ukraine are starting to show in FX. CEE FX is holding last week's gains, and EUR/CHF is now also edging back above 0.93. Lower energy prices should be supportive for the euro. Further progress on peace discussions and potentially a softer Fed Beige Book on Wednesday could see EUR/USD hold 1.1500
Oil prices are under renewed pressure amid ongoing peace talks to end the war in Ukraine
Japan's stimulus package targets inflation stabilisation, strengthening defence and diplomacy, and sustainable growth. It should spur short-term growth and reduce inflation, but may put pressure on JGBs. The BoJ's policy normalisation will likely continue, though it faces challenges and may proceed at a slower pace
The composite PMI remained broadly unchanged in November (52.4 compared to 52.5 in October), which is well above the neutral level of 50. This suggests that growth in the short run remains decent despite significant global headwinds
French business confidence and PMI indicators edged higher in November, driven by renewed optimism in the service sector. This rebound could support growth in the coming months, despite more mixed signals from industry
It could have been a lot worse for EUR/USD this week. A set of FOMC minutes that poured cold water on a December rate cut and a strong headline rise in the US jobs report could have seen 1.1500 taken out again. But instead, investors seemed to have just delayed rather than abandoned pricing for Fed easing. And Europe may still being showing some signs of life
Euro rates are more focused on the improving macro story than on AI-driven equity jitters. This also means that Bunds may not prove an effective hedge against an equity sell-off
The Bank of Korea is expected to hold the rates steady. Meanwhile, data highlights include Chinese industrial profits, Tokyo inflation, Korean and Taiwanese industrial production and Indian GDP
Japanese data shows inflationary pressures are firm and that exports remain resilient despite tariffs. An upbeat flash purchasing manager’s index suggests the economy is on the recovery path. While these outcomes favour a Bank of Japan rate hike in December, government pressure to keep policy loose might delay a move until next year
US jobs growth was stronger than expected in September, but unemployment also rose amid workers returning to the labour market and seeking jobs. Given the Fed's recent hawkish shift and the lack of official data scheduled before the 10 December FOMC meeting, it is understandable that the market thinks the next move won't come until early 2026
As negotiations to reach a final Omnibus I proposal have started, we analyse the impact each proposal would have on European banks. Despite the variations, all three proposals suggest a single path towards major scope reductions. This would be a positive for banks no longer required to report on ESG but complicate disclosures for those still in scope
Bank Indonesia held its policy rate at 4.75% amid inflation pressures and rupiah weakness, but we expect a cut in December to support growth. Risks remain skewed toward delays if currency pressures persist or the Fed postpones easinga
UK inflation has peaked, but the latest data is a tad hawkish for the Bank of England. Food inflation was strong, which is red meat for the hawks. Services inflation rose, once volatile items are stripped out. However, we still expect the Bank to cut rates in December