Sample Category Title

Markets

Monday’s ECB Schnabel driven rally in EMU yields ran into resistance yesterday. Investors in some way embraced her message that the next ECB move, after a period of rate stability, will likely be a rate hike. EMU money markets priced out the probability of a final fine-tuning/risk management cut next year and at the same time raise chances of higher rates from the turn of 2026/27 on. US markets are preparing for another ‘hawkish’ rate cut today despite ongoing pressure for the government to ease policy in a more aggressive way. Visibility on upcoming data-guidance remains low but yesterday’s rise in yields after better than expected JOLTS job openings data only illustrated market sensitivity to the topic. US yields added between 4 bps (2 & 5-y) and 0.6 bps (30-y). US yields are close to the top of the post-summer sideways technical trading ranges. A $39bn 10-y US Treasury auction delivered ‘neutral’ bidding metrics and had little impact. Equity markets took a pause with record levels back within reach. Changes in the intraday interest rate dynamics between the dollar and other currencies, including the euro, again lacked directional impact. DXY (close 99.22 from 99.08) gained marginally, mainly driven by a rebound in USD/JPY (close 156.9). EUR/USD softened slightly (close EUR/USD 1.1627). French Parliament yesterday approved the social security bill, removing an hurdle to get budget approved as soon as next week, but more likely early 2026. For now this French ‘muddling through’ scenario doesn’t help the euro.

The Bank of Canada (expected unchanged at 2.25%) and the Banco National do Brasil (expected unchanged at 15%) join the Fed in deciding on monetary policy today. The Fed is expected to proceed with another precautionary 25 bps rate cut (to 3.5%-3.75%) despite a highly divided MPC. Markets will keep a close eye at the new Summery of Economic Projections (dots) and any guidance from Fed Chair Powell. However, news from those sources will probably be highly conditional. Governors since the September forecast had little hard evidence on the labour market and even less on inflation to make substantial changes. One can expect the Fed chair to shift to an outright data-dependent narrative as the policy rate is coming closer to neutral. This puts the focus on data updates between now and Christmas (payrolls, CPI and Q3 GDP). With yields having rebounded/priced out more aggressive easing, there might again be room for some correction in case of softer data. However, question is whether today’s FOMC meeting will already allow for such a reaction. On FX, DXY and EUR/USD show little directional momentum. On the euro side of the equation, uncertainty on France and maybe even more on the outcome of negotiations to end the war in Ukraine are a drag for further euro gains.

News & Views

Chinese inflation rebounded to 0.7% y/y from 0.2%, the quickest pace since February of last year. Food prices were partly responsible for the uptick, rising for the first time since January. Non-food inflation slipped to 0.8%. Filtering for both food and energy prices, core inflation ended a six-month acceleration streak to come in unchanged at 1.2%. Other elements supporting the inflation rebound were surging gold jewelry prices (+58.4% y/y) which lifted the category “miscellaneous goods and services” to 14.2% y/y. Services prices increased at a slower rate compared to October (0.7%), the first slowing since February. The above combined with producer prices unexpectedly showing steeper drops (-2.2% from -2.1% vs -2% expected) means the CPI rebound isn’t a solid sign of deflation risks structurally easing. The Chinese yuan gapped lower at the open this morning but meanwhile swapped losses into gains around USD/CNY 7.06, a more than one year CNY high.

BoE policymakers in yesterday’s parliamentary hearing largely stuck to their personal and mixed views on whether or not it is appropriate to further lower policy rates. One of them, however, offered a glimpse on the BoE’s judgement of the November budget. Deputy governor Lombardelli said it would lower the annual inflation rate by 0.4-0.5 ppts from 2026Q2 while lifting GDP slightly by 0.2 ppts in 2027. The budget together with inflation coming off again were seen as paving the way for a December rate cut. Lombardelli suggested, however, the BoE could look through the one-off impact on inflation from the government measures but added that the latter may help bring down elevated household inflation expectations. It will probably once again be BoE governor Bailey having the swing vote in next week’s policy decision.

FOMC rate decision is the clear centerpiece of today’s sessions, with markets fully convinced the Fed will deliver a 25bps cut to 3.50–3.75%. The probability of anything else is effectively zero, and policymakers have little incentive to risk unsettling sentiment by defying expectations at this stage of the cycle. The real debate is not about tonight’s move, but about what the Committee signals for 2026 and the broader path ahead.

Turning back to September’s meeting, the median dot plot penciled in only one additional cut in 2026, taking the policy rate to 3.25–3.50%. A key question now is whether the Fed keeps that projection unchanged. While, that is the most likely outcome, but the dot plot itself will not reveal when that single cut is expected—whether early in the year or toward year-end. That ambiguity will shape how markets interpret tonight’s guidance.

This leads to the second major issue: whether the Fed is effectively entering a pause after today’s cut. One of the first clues will come from the vote split. A tight or divided vote would reinforce the view that the bar for further reductions is rising, and that January is likely to be another hold. The follow-through will come from the statement and Chair Jerome Powell’s press conference, where the tone will be scrutinized closely.

While all of this will ultimately be re-priced once next week’s November CPI and NFP data arrive, tonight’s communication is still critical for setting the base case for early-2026 policy expectations. Markets will be particularly sensitive to any shift in how the Fed describes labor market resilience, wage cooling, and tariff-related inflation risks.

In terms of market reaction, the most important gauge is pricing for a March rate cut. Fed fund futures currently assign roughly a 40% probability of a 25bps cut in March and about a 60% probability of a hold. Any move in those probabilities—driven by dots, tone, or vote split—will dictate how equities, yields, and Dollar respond.

In stocks, a key to watch is 477560.29 support in DOW. Firm break there should indicate rejection by 48431.47 high, and the corrective pattern from there should be starting a third leg. In this case, deeper pullback would be seen to 55 D EMA (now at 46797.21) and below. Effectively, the Santa rally is killed in this case before it starts. But of course, decisive break of 48431.57 will bring another record run through to year-end.

Everybody knows the Federal Reserve (Fed) will announce a 25bp rate cut today. I know it, you know it, he/she/it knows it, my five-year-old knows it, my cat, your dog, the birds in the sky. Everyone knows the Fed is lowering rates later today. Market pricing is giving it roughly an 88% probability — too high for the Fed to walk back in the absence of an emergency.

What we don’t know is what Fed members are planning for next year. How many cuts they anticipate, and whether their projections will convince markets to react accordingly.

For the doves, the case for rate cuts is clear: the US labour market has softened, partly due to a combination of aggressive anti-immigration policies, tariff uncertainty and fears around AI-related job displacement. Tariff-led price pressures, meanwhile, still haven’t shown up materially since tariffs were announced in April. Add to that the political noise — with Donald Trump pressuring the Fed to cut rates, at times with aggressive public remarks — and poor Jerome Powell is hearing things he probably never expected to hear in his lifetime.

For the most extreme doves, the Fed has “plenty of room” to cut. Kevin Hassett — one of Trump’s favourite candidates to lead the Fed next year — said yesterday that the rise of AI gives the Fed an opportunity to run easier policy because lower rates could lift both aggregate supply and demand. Higher supply, he argues, could help contain inflation.

Others think it may be wiser to pause for thought. AI-driven productivity gains are real. But looming inflation risks from tariffs still require a careful playbook — particularly if AI-driven disinflation doesn’t materialise fast enough to neutralize potential tariff-led inflation.

So, it’s complicated. All eyes will be on the Fed’s dot plot. Any hawkish tilt or reluctance to signal further cuts could trigger another repricing and weigh on sentiment.

The good news: investors aren’t walking into this meeting blindly. Money markets have already trimmed their expectations from 2–4 cuts next year to just two, reducing the risk of a sharp reaction to a “hawkish cut.”

And judging by yields, the message from investors is clear: they’re not buying the dovish narrative. Instead, investors worry that lower yields could revive inflation and ultimately prevent the Fed from cutting more — or even force a hike. The proof: the US 10-year yield has climbed since the Fed began cutting in September.

This disconnect between Fed policy and market yields suggests lower policy rates are not fully transmitting. No matter what Fed officials think, markets remain worried about inflation. They won’t absorb lower policy rates until they see evidence of inflation falling. That dynamic could prevent the S&P 500 from pushing higher into year-end.

Meanwhile, global winds are turning hawkish, as well. The Reserve Bank of Australia (RBA) said this week it debated an “extended pause or a hike,” and markets now price a rate increase by June — a stark reversal from expectations of a cut just a month ago. The Australian 10-year yield has jumped from ~4.10% in late October to above 4.80%.

The Bank of Canada (BoC) is expected to hold today, but markets are almost fully pricing a hike by late 2026, on the back of strong Canadian labour data. Canadian 10-year yields have risen from around 3% to near 3.50%.

The European Central Bank (ECB) isn’t expected to cut next year, and Isabel Schnabel said this week she’s comfortable with market pricing that the ECB’s next move could be a hike. The European 10-year yield is now around 2.85%, up from ~2.50% in October.

The Reserve Bank of New Zealand (RBNZ) watchers have also shifted from expecting a September cut to expecting a hike. The 10-year yield has spiked from ~4% to above 4.6%.

And the Bank of Japan (BoJ) is widely expected to hike next week. The Japanese 10-year is flirting with 2%, raising the risk of Japanese pension funds and insurers — major US Treasury holders — repatriating capital back home, and pull the rug from under the feet of US treasuries.

Consequently, even though equity investors still debate whether the tech sector is in bubble territory, global bond investors have little doubt about two things: DM debt is unsustainably high, and central bank expectations are shifting hawkish. The latter pushes the yields higher.

And if yields continue pushing higher, valuations will come under pressure — especially for highly leveraged companies.

So, today’s reaction to the Fed will likely set the tone for the remainder of the year: will Santa bring gifts, or stay snowed out? Answer in a few hours.

In focus today

In the US, today's main event will be the FOMC's rate decision. We expect a 25bp cut to the policy rate target, in line with consensus and market pricing. We expect Powell to verbally push back against continuation of sequential rate cuts in early 2026. The updated rate projections, or 'dots', will likely reflect varied views within the FOMC, while macroeconomic projections will see only cosmetic changes. The Fed may also take further steps to support liquidity. See more in our Fed preview: Hawkish cut is a consensus choice, 5 December. Ahead of the decision, Q3 employment cost index (ECI) is due for release.

In Sweden, October economic activity data is released, including the GDP indicator, household consumption, new orders, and production value index. While we expect slower growth for Q4 compared to Q3 due to weaker summer indicators, this does not alter the positive outlook for 2026.

In Norway, we expect November core inflation to decline to 3.1%, matching Norges Bank's September MPR estimate. October core inflation surprised to the upside at 3.4% y/y, likely influenced by price adjustments ahead of Black Week.

In Canada, the Bank of Canada is set to announce its rate decision. We expect the rate to remain unchanged at 2.25%, in line with consensus.

In Denmark, November inflation data is released. We expect it to remain unchanged at 2.1% y/y, with food prices remaining a key focus due to their impact on consumer sentiment.

Economic and market news

What happened overnight

In China, November CPI came in as expected at 0.7% y/y, reaching a 21-month high driven largely by food prices. Core inflation held steady at 1.2% y/y, while PPI remained stuck in deflationary territory at -2.2% y/y (cons: -2.0%). This underlines the persistent weakness in domestic demand and the challenges of achieving a near-term recovery.

In US-Japan relations, the US criticised China for targeting Japanese military aircraft with radar during a training exercise last week, calling the actions "not conducive to regional peace and stability." Japan welcomed the support, emphasising the strength of their alliance.

What happened yesterday

In the US, the JOLTs job openings report for October came in stronger than expected at 7.670m (cons: 7.150). This indicates that labour demand remains relatively robust, aligning with signals from high-frequency indicators. While the overall labour market balance remains steady, details in the report were less positive: voluntary quits and hires declined, while involuntary layoffs increased. The ratio of job openings to unemployed remains stable at 1.01, consistent with levels observed throughout the year. Thus, the Fed is still likely to cut rates today, but on the margin, this increases the likelihood of a pause in the easing cycle in early 2026.

The NFIB small business optimism index for November rose modestly by 0.8 points to 99.0. Actual price changes increased notably, while plans for future price changes remained stable. Hiring plans also improved, recovering close to pre-pandemic levels.

In France, PM Sébastien Lecornu secured a political win yesterday evening as the parliament narrowly approved next year's social security budget, thereby averting a government crisis. The bill's adoption reduces pressure on PM Sébastien Lecornu to resign, as his strategy to win over the Socialists by suspending the pension reform helped break political deadlock. However, challenges remain with the main budget, which has faced even tougher opposition, with only one lawmaker supporting it in an earlier vote. The debate on the main budget begins on 15 December, which means it might be passed before Christmas, and the government would thereby avoid relying on emergency laws to roll over the 2025 budget. However, there is still a significant risk that the parliament will fail to reach an agreement.

Equities: It was a slow day in equities, as investors are on hold before the Fed meeting tonight. S&P 500 and Stoxx 600 ended a meagre -0.1% lower. Defensives - or should we say health care - underperformed. In fact, global defensives have underperformed cyclicals since 25 November. However, unlike then, this is no longer a broad defensive pullback. In fact, consumer staples was the best performing sector yesterday. The defensive underperformance is transforming more and more to health care simply selling off (after an incredible rally the last three months). Global health care stocks were -1% lower yesterday, quite sizable given the mild moves elsewhere. The wait and see mode is continuing this morning, with futures little changed.

FI and FX: US yields edged higher after a stronger-than-expected October JOLTS report, signalling resilient labour demand despite some softening in quits and hires. The Fed is expected to cut rates today, but data slightly raises the odds of an early-2026 pause. In Europe, yields consolidated as France avoided a government crisis by passing the social security budget, though risks remain around the main budget debate later this month. EUR/USD trades in a tight range ahead of the FOMC, with risks leaning modestly USD-positive, while SEK strengthened despite seasonal outflow expectations. Today's Norwegian inflation data plus the Fed decision might guide the NOK in the near term.

China’s November inflation data paint a picture of an economy showing modest signs of surface-level improvement while still grappling with entrenched deflationary pressures.

CPI accelerated from 0.2% yoy to 0.7% yoy, matching expectations and marking a 21-month high. The gain was driven primarily by food prices, which rose 0.2% yoy after a -2.9% yoy drop in October. Core inflation held steady at 1.2% yoy, while energy prices slid -3.4% yoy—an even deeper decline than the prior month.

On a monthly basis, CPI fell -0.1% mom after October’s 0.2% mom increase, contrary to expectations for another rise.

PPI slipped from –2.1% yoy to –2.2% yoy, extending China’s factory-gate deflation streak into a fourth year. Manufacturers continue to cut prices aggressively to clear excess supply, a sign that domestic and external demand remain too weak to absorb output.

Coal mining prices tumbled -11.8% yoy, while the oil and gas extraction sector saw a -10.3% yoy decline—deep drops that suggest little improvement in industrial profitability.

Key Highlights

• AUD/USD gained pace for a move above the 0.6600 resistance.
• A key bullish trend line is forming with support at 0.6620 on the 4-hour chart.
• EUR/USD failed to continue higher above 1.1680.
• USD/JPY started a fresh increase above the 156.00 resistance.

AUD/USD Technical Analybsis

The Aussie Dollar started a strong increase above 0.6550 against the US Dollar. AUD/USD even cleared the 0.6600 barrier to enter a positive zone.

Looking at the 4-hour chart, the pair settled above the 0.6600 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). A high was formed at 0.6648, and the pair is now consolidating gains.

There is also a key bullish trend line forming with support at 0.6620. Immediate resistance sits near 0.6650. The first key hurdle is seen near 0.6665.

A close above 0.6665 could open the doors for a move toward 0.6700. Any more gains could set the pace for a steady increase toward 0.6740. On the downside, there is key support at 0.6620 and the trend line at 1.1620.

The next support is 0.6595 and the 23.6% Fib retracement level of the upward move from the 0.6421 swing low to the 0.6648 high. A close below 0.6595 could open the doors for a test of 0.6560.

The main support sits near the confluence zone at 0.6535, the 100 simple moving average (red, 4-hour), the 200 simple moving average (green, 4-hour), and the 50% Fib retracement level of the upward move from the 0.6421 swing low to the 0.6648 high.

Looking at EUR/USD, the pair failed to extend gains above 1.1680 and recently corrected lower.

Upcoming Key Economic Events:

• BoE's Governor Bailey speech.
• ECB's President Lagarde speech.
• BoC Interest Rate Decision – Forecast 2.25%, versus 2.25% previous.

We will now turn to a more technical look into the US curve, a 10-Year Bond chart to see what's going on behind the pricing for tomorrow's meeting, and provide a few more scenarios depending on the rate cut path.

More particularly, with the 25 bps cut being a quasi-certainty, we will provide potential scenarios on if the cut is hawkish or dovish and a few potential reactions.

A first move to signal in Markets, is the recent move higher in US treasuries across the curve.

Mentioned many times across our analyses on MarketPulse, the speech from NY Fed's Williams, a very influential speaker, affected Markets on a large scale:

Asset Performance since Williams' Speech – Source: TradingView

Counter-intuitively, the speech that re-introduced possibilities of lower rates (which you can find right here) led a huge rebound in Stock Markets and Metals, but similarly preceded a move between +15 bps to +20 bps in US treasuries.

But why?

US 10-Year Bond with 10Y Yield underlay – December 9, 2025 – Source: TradingView

Never forget the sell-the-news effect – At least for the bonds!

The reasoning behind this move is a microcosm of the 2025 trend: A fear of an influenced Federal Reserve, which may fast-forward its rate-cut cycle at the cost of their data-dependency–or even their independence!

As explained in our recent pre-FOMC analysis, the 25-bps move could be one done with a blind eye – most of the data released throughout the past month is data dating back to September, such as the PPI and Retail Sales data (which corroborated a slowdown).

However, at the same time, more actual data also sent mixed signals, particularly regarding Labor – Weekly Jobless Claims came in at the lowest level since September 2022 just a week ago, while ADP Private Payrolls showed a regressing picture.

Until now, the Fed had been remarkably resilient about taking preemptive decisions without a clear consensus on why to hike or cut – and this shift in perspective also comes amid still uncertain tariff-led inflation outlooks.

The US Curve: Mid-October vs Today – A 15 to 25 bps increase throughout all durations

The Greenback falling at the same time as yields rising indicates an increased premium for holding US debt.

Many words to describe the same phenomenon: The Debasement Trade.

If you haven't heard about this term, you can find a stellar definition right here. To summarize, it's a financial trend shifting away from fiat currencies and governmental assets to focus on finite assets, such as Stocks, Cryptocurrencies, and Metals.

Coming back to the curve picture from above, the front-end flattened quite aggressively, implying Rates staying put for a longer-while after this cut.

Mid-2026 Pricing: 50% odds of a 3% Neutral Rate – Source: TradingView

This takes us to our expectations for tomorrow:

Scenarios and probabilities:

A hawkish cut (70% chance)

This is the base case for tomorrow's decision (in my opinion).

Powell should indicate a risk-management move after the streak of negative private payrolls data combined with a not-aggravating inflationary picture.

To balance out these words, expect the Fed Chair to point out to a blinded Fed due to the Bureau of Labor Statistics closure and delayed data, particularly for NFP.

Reactions in Major assets

• Upcoming rate cut probabilities decrease to price a pause in the waiting for more data
• The US dollar maintains its ongoing consolidation range (between 99.00 to 100.00 on the Dollar Index)
• Stock Indexes correct due to their ecstatic post-Williams repricing
• Short-end yields shoot higher while long-end yields stay put (Harsh bear flattening)
• Metals correct slightly

A dovish cut (10% chance)

Jerome Powell folds and makes extensive mentions on the private labor market while reducing mentions of inflation.

Reactions in Major assets

• Rate cuts get front-loaded (moved forward) aggressively but leaves VERY volatile future pricings
• The US Dollar falls off a cliff and goes to retest the yearly lows
• Stock Indexes flash to new all-time highs but may find struggles as Fed Independence doubts rage back
• Short-end yields shoot lower while long-end yields shoot higher (Strong steepening)
• Metals explode to new all-time highs and keep running higher

A dovish pause (20%)

The Fed decides to hold their breath due to a lack of data but keep a strong option on rate cuts in the short-term.

This one is the most tricky.

Most participants expect a cut, but this would quickly shift the current pricing:

Reactions in Major assets

• 2026 Rate cuts get front-loaded on a smaller extent
• The US Dollar rallies to hold above/close to the 100.00 level.
• Stock Indexes see VERY volatile swings and form a large range
• The curve stays put, long-term yields go lower (small Bull flattening)
  Metals correct slightly

This article wasn't the most common, but I hope it will be instructive.

Safe Trades!

Ethereum: ⬆️ Buy

• Ethereum broke daily down channel
• Likely to rise to resistance level 3600.00

Ethereum cryptocurrency recently broke the resistance zone between the resistance level 3200.00 (which stopped the previous impulse wave 1) and the resistance trendline of the daily down channel from October.

The breakout of this resistance zone accelerated the active impulse wave 3 of the sharp intermediate impulse wave (C) from November.

Given the bullish sentiment seen across the crypto markets today, Ethereum cryptocurrency can be expected to rise to the next resistance level 3600.00.

EURJPY: ⬆️ Buy

• EURJPY broke key resistance level 182.00
• Likely to rise to resistance level 184.00

EURJPY currency pair recently broke above the key resistance level 182.00 (which has been reversing the price from the middle of November stopping earlier waves 3 and i).

The breakout of the resistance level 182.00 accelerated the active impulse wave iii – which belongs to wave 3 of the intermediate impulse wave (5) from October.

Given the clear daily uptrend and strong yen sales seen today, EURJPY currency pair can be expected to rise to the next resistance level 184.00 (target price for the completion of the active impulse wave iii).