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Fed Governor Michelle Bowman expressed concerns over the recent slowdown in inflation reduction efforts, emphasizing that while there has been "considerable progress in lowering inflation since early 2023," this progress "seems to have stalled in recent months."

While acknowledging the complexity of monetary policy decisions, Bowman expressed particular concern about the price stability side of the Fed's dual mandate, given that unemployment remains at historically low levels. "I see greater risks to the price stability side of our mandate, especially while the labor market remains near full employment," she said in a speech.

Bowman is known for her hawkish stance on monetary policy. In September FOMC meeting, she dissented from the majority decision to cut rates by 50bps, advocating instead for a smaller 25bps reduction. Her comments reinforce her cautious approach toward easing monetary policy further, especially given the risks of persistent inflation in a strong labor market.

Full speech of Fed's Bowman here.

BoE Deputy Governor Dave Ramsden expressed support for the MPC's cautious approach to easing interest rates, citing economic uncertainties tied to recent fiscal measures and labor market data. Ramsden emphasized the need for a "watchful and responsive" strategy given lingering questions about the effects of higher employer taxes and potential misrepresentations in labor statistics.

However, Ramsden suggested he might endorse a faster pace of rate cuts if uncertainties ease and disinflationary pressures become more evident. He noted, "Were those uncertainties to diminish and the evidence to point more clearly to further disinflationary pressures... then I would consider a less gradual approach to reducing Bank Rate to be warranted."

BoE has projected that inflation will remain above its 2% target until early 2027, driven in part by fiscal stimulus and higher minimum wages under the Labour government. Ramsden acknowledged this scenario as "plausible" but also placed significant weight on an alternative outlook where inflation declines more quickly. This could occur through "more symmetry in wages and price setting, with less domestic inflationary pressure."

Looking ahead, Ramsden predicted that employers are likely to implement pay settlements at the lower end of the 2–4% range, which could lead to inflation staying closer to 2% in the early part of the forecast period. However, under this scenario, inflation could dip "more materially later on, lower than in the MPC's published forecasts," he added.

Greek ECB Governing Council member Yannis Stournaras emphasized at an event overnight that inflation in Eurozone is now projected to reach the 2% target "sooner than earlier expectations," likely by early 2025 rather than the fourth quarter as previously anticipated. This shift suggests the ECB’s policy focus may increasingly pivot to ensuring "we don’t undershoot our inflation objective".

Stournaras highlighted markets are "extremely sensitive" to disappointing growth readings. He warned, “If negative surprises for growth come in and we fail to unwind our restrictive monetary-policy stance at the appropriate pace, unnecessary market turbulence could be induced."

While he acknowledged that the September inflation reading of 1.7% marked a success in controlling price pressures, he cautioned it should also serve as a “wake-up call.” Prolonged monetary restrictions, he warned, could risk "undershooting of our inflation target over the medium term and impede growth".

• Natural gas broke the multi-month resistance level 3.150
• Likely to rise to resistance level 3.750

Natural gas continues to rise strongly after the earlier breakout of the key multi-month resistance level 3.150, reversing the price from May.

The breakout of the resistance level 3.150 accelerated the active impulse waves 3 and (3) – both of which belong to the long-term upward impulse wave 3 from August.

Given the clear daily uptrend, natural gas can be expected to rise to the next resistance level 3.750, which is the target price for the completion of the active wave (3).

Markets

News agency Reuters reported just before the start of European trading that Russian President Putin would be open to talks on a ceasefire deal in Ukraine with the US. He wants a carve-up of four regions in the south—east of Ukraine that Russia annexed in 2022, but doesn’t fully control. It caused a positive start on stock markets, rebounding somewhat after yesterday’s geopolitical escalation (Putin’s signing of updated nuclear doctrine). Ukrainian President Zelensky reiterated in response that his country won’t make concessions on sovereignty or territory. Main European equity indices currently gain around 0.50%. Hotter-than-expected October UK CPI data served as a reminder that the government’s fiscal booster severely ties the Bank of England’s hands. Headline inflation rose by 0.6% M/M to 2.3% Y/Y (from 1.7%). Core CPI accelerated to 0.4% M/M (3.3% Y/Y from 3.2%). Goods prices rose by 0.8% M/M (-0.3% Y/Y from -1.4%) and services costs by 0.4% M/M (5% Y/Y from 4.9%). UK money markets barely discount a cumulative 50 bps of additional rate cuts over the next 9 months. UK Gilts sell-off today, but do so in a bearish steepening instead of flattening fashion. UK yields add 1.2 bps (2-yr) to 7.1 bps (30-yr). Sterling is slightly stronger at EUR/GBP 0.8330. The ECB’s Q3 negotiated wage data were today’s sole other date point of interest. Wage growth accelerated from 3.5% Y/Y in Q2 to an EMU record high of 5.4% driven by a 8.8% increase in Germany (quickest since 1993). Wage inflation adds to stronger-than-expected Q3 GDP growth and more sticky price pressures in October. Investors continue reducing 50 bps rate cut bets by the ECB at its December policy meeting. ECB vice-president de Guindos confirmed that prudence is needed. Current projections don’t show a risk of undershooting the 2% inflation target. The impact on the overall European bond market could have been possible bigger if it weren’t for the lingering geopolitical event risk. Ukraine now also firing UK long term missiles (Storm Shadow) is a point in case. German yields add 2.9 bps (2-yr) to 4.3 bps (10-yr). EUR/USD dips from 1.06 to 1.0550.

The Flemish Community today tapped its outstanding 3.125% Jun2034 benchmark for €1bn (books above €8.3bn). The deal was prices at 24 bps over the Belgian OLO curve (vs guidance at OLO+28 bps area). Flandres now raised €3.75bn YTD via regular benchmarks, the upper end of the targeted €3.25-3.75bn in its funding plan. A sustainable benchmark (€1.25bn raised vs €1.25-1.50bn target) and €0.25bn in EIB funding (target) are this year’s other long term funding sources so far. No private placements (€0.75-1bn) have been done so far. The total amount raised (€5.25bn) compares with a €6.55bn target. Next year, Flanders is looking at around €5bn in new long-term funding.

News & Views

The ECB in its biannual Financial Stability Review highlighted several risks including “rising global trade tensions and a possible further strengthening of protectionist tendencies”. With economic growth now a bigger threat than inflation, the ECB is worried that trade developments may have an adverse impact on (global) growth, inflation and asset prices. Against the backdrop of already tepid growth, it is markedly more explicit about the bloc’s fiscal risks. The ECB pointed to “elevated debt levels and high budget deficits”. In an echo to the sovereign debt crisis around 12 years ago, the ECB mentioned a potential resurgence of market concerns over debt sustainability. The combination of low growth and high government debt makes it more difficult to address other pressing matters such as defense spending and climate-related investments, the central bank said. Other concerns the ECB mentions include high borrowing costs and weak growth dragging on corporate balance sheets, as well as credit risks for SME’s and lower-income households. In a context of “elevated macro-financial and geopolitical uncertainty” a warning was issued for a sudden sharp reversal in certain market segments given high asset valuations.

French far-right leader Le Pen today threatened to topple PM Barnier’s coalition government if her party’s cost-of-living concerns were not addressed by the 2025 budget. She told RTL radio that if the government crosses this “red line”, the Rassemblement National will vote no-confidence. Le Pen said that RN opposes increasing the tax burden on households, entrepreneurs or pensioners and that so far these demands were not reflected. Barnier’s coalition is a fragile one after snap parliamentary elections last summer didn’t produce an absolute majority for any party. The far-left tabled a vote of no-confidence already earlier this year but that failed since it lacked the support of RN. Since the elections, France’s credit risk premium has risen to surpass the one for Belgium, Portugal and Spain.

Daily Pivots: (S1) 153.70; (P) 154.25; (R1) 155.21; More...

Intraday bias in USD/JPY remains mildly on the upside for retesting 156.74. Firm break there will resume the whole rally from 139.57 towards 161.94 high. On the downside, though, break of 153.27 will resume the correction towards 38.2% retracement of 139.57 to 156.74 at 150.18.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). The range of medium term consolidation should be set between 38.2% retracement of 102.58 to 161.94 at 139.26 and 161.94. Nevertheless, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 0.8789; (P) 0.8836; (R1) 0.8870; More…

USD/CHF is staying in consolidations below 0.8916 and intraday bias remains neutral. Further rally is expected as long as 0.8773 resistance turned support holds. On the upside, break of 0.8916 and sustained trading above 61.8% retracement of 0.9223 to 0.8374 at 0.8899 will pave the way back to 0.9223 key resistance.

In the bigger picture, price actions from 0.8332 (2023 low) are currently seen as a medium term corrective pattern. Rise from 0.8374 is seen as the third leg. Overall outlook will continue to stay bearish as long as 0.9223 resistance holds. Break of 0.8332 low is in favor at a later stage when the consolidation completes.

Daily Pivots: (S1) 1.0545; (P) 1.0574; (R1) 1.0625; More...

EUR/USD is still bounded in consolidations above 1.0495 temporary low and intraday bias remains neutral. Outlook stays bearish with 1.0760 support turned resistance intact. . On the downside, firm break of 1.0495 will resume the fall from 1.1213 to 1.0447 support and then 1.0404 key fibonacci level next.

In the bigger picture, price actions from 1.1274 (2023 high) are seen as a consolidation pattern to up trend from 0.9534 (2022 low), with fall from 1.1213 as the third leg. Downside should be contained by 50% retracement of 0.9534 (2022 low) to 1.1274 at 1.0404, to bring up trend resumption at a later stage. However, firm break of 1.0404 will raise the chance of reversal and target 61.8% retracement at 1.0199.

Daily Pivots: (S1) 1.2634; (P) 1.2662; (R1) 1.2711; More...

GBP/USD's recovery extended higher today but lost momentum well ahead of 55 4H EMA. Intraday bias remains neutral at this point. Outlook stays bearish with 1.2842 support turned resistance intact. On the downside, break of 1.2596 will resume the fall from 1.3433 to 100% projection of 1.3433 to 1.2842 to 1.3047 at 1.2456.

In the bigger picture, a medium term top should be in place at 1.3433, and price actions from there are correcting whole up trend from 1.0351 (2022 low). Deeper decline is now expected as long as 55 D EMA (now at 1.2977) holds, to 38.2% retracement of 1.0351 to 1.3433 at 1.2256, which is close to 1.2298 structural support. Strong support should be seen there to bring rebound.