Markets
Yields in core markets mostly were driven by technical considerations today. Investors were cautious to engage in outright positions as they await a huge batch of key economic data that will be released both in the US and EMU, starting tomorrow. Especially US payrolls and PMI’s published tomorrow might help markets to make up their mind on the amount and/or the pace of further Fed rate cuts in 2026. The European PMI’s will be read against recent indications from ECB policymakers that growth has been more resilient than expected, rekindling the debate on timing of a future ECB rate hike, potentially at the turn of 2026/27. The only relevant US data release today, the NY Fed Empire manufacturing survey showed an unexpected sharp drop from +18.7 to -3.9, but the negative reading on the current situation was counterbalanced by a substantial improvement in the forward-looking 6 months ahead index, improving to a solid 37.5 (best level since January). The market reaction to this (mixed) release was limited. US yields are ceding between 3.5 bps (5-y) and 2.5 bps (30-y). German Bund yields are easing -0.8 bps (2-y) to -2.8 bps (30-y). Equity markets try to find their composure after mainly US tech stocks again felt some shivers from headlines questioning the amount and the efficacy of AI spending by some tech bellwethers last week. The EuroStoxx 50 adds 0.7%. The all-time record high is less than 1.5% away. US equities try to recoup part of Friday’s setback (S&P +0.3%), but the move lacks conviction. For now, moves like the one end last week remain corrections including some rotation into less AI-related sectors. Key support levels stay out of reach, for now. The price of crude oil remains under pressure, amongst others driven by headlines that global cure oil stocks and stocks of oil products remain above seasonal averages.
On FX markets, the dollar struggles to avoid further losses. The narrative from this week’s data and CB meetings might favor the likes of the euro (better growth prospects) or the yen (BoJ rate hike, further policy normalization). DXY trades near 98.2 nearing a first support area at 98.13/03 (last week post-Fed low/mid-October low). EUR/USD at 1.1755 is holding near last week’s post-Fed top (1.1763). The yen this morning ‘rallied’ as a solid quarterly BoJ Tankan report gave a nihil obstat for the central bank to take a next step in its (admittedly very gradual) process of policy normalization. USD/JPY eases from 155.8 to 155.14. That said, the picture for the Japanese currency still looks unconvincing. A break below USD/JPY 154.35 could signal the yen gaining some traction. EUR/JPY also eases slightly (182.2) but stays withing reach of its all-time record since the introduction of the euro. EUR/GBP is holding stable (0.8775 area) with tomorrow’s labour market report and December PMI’s next data references for GBP trading.
News & Views
The Swiss State Secretariat for Economic Affairs has slightly revised upwards its forecast for economic growth in 2025 (adjusted for sporting events: 1.4% from 1.3%) and 2026 (1.1% from 0.9% in October) as the reduction in US tariffs have improved prospects for the sectors concerned. In 2027, Swiss growth is expected to normalize at 1.7% as the global economy gradually recovers. The KOF Swiss Economic Institute in its Winter forecast, also released today, plots a similar growth path. Domestic demand remains the main driver of growth with low inflation supporting real incomes: inflation is forecast to average 0.2% in both 2025 and 2026 (October forecast: 0.2% in 2025, 0.5% in 2026) before rising slightly to 0.5% in 2027. The outlook remains surrounded by a lot of mainly downside risks including lingering trade uncertainty, lofty valuations, debt-related problems (sovereign, balance sheet risks at FI’s, real estate markets) and geopolitics. Should any of these risks materialize, further upward pressure on the Swiss franc would be expected.
Reserve Bank of New Zealand governor Breman this morning observed that financial markets conditions have tightened since the November decision, beyond what is implied by the central projection for the OCR. It were her first public comments since taking the helm at the RBNZ earlier this month. With the remark, she pushed back against NZ money market expectations that the central bank in H2 of this year will turn back to hiking its policy rate. It was the natural reflex after the RBNZ suggested last month that it was likely done easing. The kiwi dollar initially lost ground, with NZD/USD dipping from 0.5810 to 0.5770, but most of the move was erased later on.
 and 2026 (1.1% from 0.9% in October) as the reduction in US tariffs have improved prospects for the sectors concerned. In 2027, Swiss growth is expected to normalize at 1.7% as the global economy gradually recovers.){kind=link}