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Markets

A flurry on smaller items had the potential to revive the single currency, but the European currency lacks the power and the heart to make any significant headway. Positive risk sentiment is the obvious first one with the EuroStoxx 50 currently rising 0.3%, visiting unchartered territory with the exception of a brief spell on November 12-13. Positive surprises in eco data counted as a second factor. October German factory orders increased by 1.5% M/M, beating 0.3% consensus. The second reading of EMU Q3 GDP showed an ever more resilient economy with the growth pace upwardly revised from 0.2% Q/Q to 0.3% Q/Q on the back of stronger household consumption (+0.2%), government spending (+0.7%) and investments (gross fixed capital formation +0.9%). Finally, the German government avoided a humiliating defeat with the approval of the pension bill. In the run-up to the vote, 18 CDU members threatened to vote against the bill, stripping the coalition of its majority. Eventually, the CDU/SPD mustered 318 votes in 630-parliament with 7 ruling lawmakers voting against, two abstaining and one not casting a vote. European yields trade around 1 bp higher across the curve today with EUR/USD going nowhere at 1.1650. On the US side of the story, there’s even less to talk about with markets counting down to Wednesday’s FOMC meeting.

The Belgian debt agency today published its Borrowing Requirements & Funding Plan for 2026. The BDA expects the 2026 gross borrowing requirements of the federal government to amount to €59.55bn, up from €53.65bn this year. Next year’s net financing requirement would amount to €26.37bn, taking into account the recent budgetary decision of the federal government for 2026-2029. OLO redemptions stand at €28bn. To finance these needs, the BDA mainly relies on long term funding. They look to issue €51.6bn of OLO’s, representing a €5.9bn increase compared to this year’s €45.7bn. Three new syndicated fixed rate deals are planned. The BDA has the intention to issue a new 10-yr benchmark, a new 5-yr benchmark, and one new OLO in a long maturity (obviously depending on market conditions). It does not anticipate launching a new Green OLO in 2026. The EMTN/Schuldscheine programmes, state notes and an increase in short term debt (Treasury Certificates) will complement the OLO funding. The average life of the Belgian debt portfolio reached 10.00 years as per 30 November 2025 (from 10.50 years at the start of the year), and the duration amounted to 7.44 years (from 8.44 years). The implicit cost of the portfolio was 2.01% in November (from 1.94%). In 2026, the average life of the debt portfolio will again be required to exceed 9.25 years.

News & Views

The FAO world food price index dropped for the third consecutive month in November (-1.2% M/M & -2.1% Y/Y), with all subindices except cereal declining. The cereal subindex rose 1.8% M/M (-5.3% Y/Y). Despite a generally comfortable supply outlook and reports of good harvests in Argentina and Australia, global wheat prices rose by 2.5 M/M in November, albeit from levels last seen in the first half of 2020. The Vegetable Oil Price Index dropped 2.6% M/M, reaching a five-month low, reflecting lower prices of palm, rapeseed and sunflower oils, more than offsetting a slight increase in soy oil. The picture in the meat price index was mixed (-1% M/M but up 4.9% Y/Y). Diary prices (-3.1% M/M and -2.4% Y/Y) recorded declines across all major dairy commodities, stemming from rising milk production and abundant export supplies in key producing regions. The Sugar Price Index declined 5.9% M/M and 29.9 Y/Y, reaching the lowest level since December 2020. Expectations of ample global sugar supplies in the current season continued to exert downward pressure on prices.

The Canadian economy added 53.6k jobs in November. After strong gains (>60k) in September and October, the market expected a slight drop. November gains were driven by part-time employment (63k). Full-time employment eased slightly (-9.5k). Job gains were mostly registered in the services sector (42.8K). Still goods-producing activities also contributed positively (11k). The unemployment rate dropped from 6.9% to 6.5%, but this was partially due to a decline in the labour force and the participation rate. Hourly wage growth was unchanged at 4%. The 2-y Canadian government bond yield jumps 14 bps to 2.6% after the release, strengthening believe that the Bank of Canada has ended its easing cycle (at 2.25%).The loonie strengthens from USD/CAD 1.395 to 1.389.

Daily Pivots: (S1) 1.1629; (P) 1.1656; (R1) 1.1670; More….

No change in EUR/USD's outlook and intraday bias stays mildly on the upside. Fall from 1.1917 should have completed at 1.1467. Further rise should be seen to 1.1727 resistance first. Firm break there will bring retest of 1.1917 high. Nevertheless, below 1.1590 minor support will mix up the outlook and turn bias neutral again.

In the bigger picture, considering bearish divergence condition in D MACD, a medium term top is likely in place at 1.1917, just ahead of 1.2 key psychological level. As long as 55 W EMA (now at 1.1345) holds, the up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2000 will carry larger bullish implications. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.

Daily Pivots: (S1) 1.3303; (P) 1.3344; (R1) 1.3369; More...

Intraday bias in GBP/USD stays on the upside for the moment. Rise from 1.3008 is in progress for 1.3470 resistance first. Decisive break there will pave the way to retest 1.3725/3787 resistance zone. On the downside, below 1.3274 resistance turned support will turn intraday bias neutral first. But risk will stay on the upside as long as 1.3718 support holds, in case of retreat.

In the bigger picture, the break of 55 W EMA (now at 1.3184) is taken as the first sign that corrective rise from 1.0351 (2022 low) has completed. Decisive break of trend line support (now at 1.2760) will solidify this case and target 38.2% retracement of 1.0351 to 1.3787 at 1.2474 next. Meanwhile, in case of another rise, strong resistance should emerge below 1.4248 (2021 high) to cap upside to preserve the long term down trend.

Daily Pivots: (S1) 0.8006; (P) 0.8023; (R1) 0.8055; More…

No change in USD/CHF's outlook and intraday bias stays neutral at this point. Price actions from 0.7828 low is seen are a corrective pattern. On the upside, above 0.8052 resistance will indicate that pattern is still extending, and turn bias back to the upside for 0.8123 and above. On the downside, below 0.7990 will bring deeper fall back towards 0.7877 support.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).

Daily Pivots: (S1) 154.57; (P) 155.05; (R1) 155.60; More...

Intraday bias in USD/JPY stays on the downside for the moment. Sustained trading below channel support should bring deeper correction to 55 D EMA (now at 153.11). Firm break there will bring deeper fall to 150.90 cluster (38.2% retracement of 139.87 to 157.88 at 151.00). For now, risk will stay on the downside as long as 156.17 resistance holds, in case of recovery.

In the bigger picture, current development suggests that corrective pattern from 161.94 (2024 high) has completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94 high. Decisive break of 158.85 structural resistance will solidify this bullish case and target 161.94 for confirmation. On the downside, break of 150.90 resistance turned support will dampen this bullish view and extend the corrective range pattern with another falling leg.

Daily Pivots: (S1) 1.3931; (P) 1.3954; (R1) 1.3982; More...

USD/CAD's fall accelerate lower today and intraday bias stays on the downside. Current development argues that rise from 1.3538 has completed at 1.4139, on bearish divergence condition in D MACD. Deeper fall should be seen to 61.8% retracement of 1.3538 to 1.4139 at 1.3768. Firm break there will argue that whole decline form 1.4791 might be ready to resume through 1.3538 low. For now, risk will stay on the downside as long as 1.3970 support turned resistance holds, in case of recovery.

In the bigger picture, price actions from 1.4791 medium term top is likely just unfolding as a correction to up trend from 1.2005 (2021 low), with rise from 1.3538 as the second leg. A third leg should follow before up trend resumption. That is, range trading is set to extend for the medium term. For now, this will remain the favored case as long as 1.3886 support holds. However, firm break of 1.3886 will revive the case that fall from 1.4791 is indeed a larger scale correction.

• Markets now treat a December rate hike to 0.75% as the base case.
• Inflation remains above target, with limited improvement in core measures.
• Rising rate expectations are strengthening the yen, supported by a narrowing US - Japan rate spread.
• Higher yields may constrain the BoJ’s pace of tightening next year.

Growing likelihood of a December rate increase

Expectations for another interest rate hike in Japan are clearly strengthening. Although initial hints appeared as early as September, they have intensified markedly in recent days. According to the latest reports, Bank of Japan policymakers are prepared to raise the policy rate to 0.75% at the December meeting - provided no significant disruptions emerge. Markets are now almost fully pricing in such a move, making it the baseline scenario.

Valuation of futures contracts for the future path of interest rates in Japan, source: Bloomberg

Inflation pressures persist despite partial stabilisation

After a period of uncertainty linked to trade tensions, conditions have stabilised somewhat, while inflation remains above the central bank’s target and continues to strain households. Although much of the price growth stems from volatile food costs - an area monetary policy should not overreact to - the core inflation index in Japan excludes only fresh food and energy. Within this measure, improvement has been limited despite some stabilisation in individual categories.

Inflation measures in Japan and the level of the main interest rate, source: Bloomberg

The risk of credibility loss for the Bank of Japan

A prolonged period of above-target inflation threatens to undermine the central bank’s credibility. For decades, Japan grappled with very low inflation, and markets grew accustomed to price growth below target. Today’s environment is different. Ignoring persistently elevated inflation - even if partly driven by unstable factors - is becoming increasingly difficult to justify.

Yen strengthens as rate expectations rise

Rising expectations for further rate hikes are supporting the yen, which has begun to appreciate against the dollar after weeks of weakness. The USD/JPY pair is trending lower, and the prospect of additional moves suggests further strengthening of the Japanese currency. The Bank of Japan will likely raise rates again in the spring - to around 1% - while the Federal Reserve is expected to continue its easing cycle. As a result, the interest-rate differential between the US and Japan should narrow to roughly 150 basis points by the end of next year, creating further room for yen appreciation.

Higher rates push bond yields up

Higher interest rates come with side effects, especially the rise in Japanese government bond yields. Recent increases have been substantial. While this is unlikely to stop the BoJ from delivering a December hike, it may slow the pace of future actions - the central bank is keen to avoid triggering a sharp sell-off in the debt market, especially as the government’s fiscal package is also exerting upward pressure on yields.

Technical picture of USD/JPY

In the second half of November, the USD/JPY currency pair reached levels corresponding to the peak recorded at the beginning of this year. The exchange rate has ‘returned’ to the upward trend channel, which it broke above last month. Signals coming from the BoJ, together with the technical setup, indicate that the strengthening of the JPY may continue, pushing the pair’s quotations toward even 150.00.

USD/JPY currency pair chart, daily data, source: Tradingview

AUD/USD holds in steep uptrend for the eleventh consecutive day and on track for the second straight weekly gain, mainly driven by weaker US dollar on growing expectations of Fed rate cut, but also holding firm tone against other major currencies.

The pair hit new 2 ½ month high on Friday and cracked strong barriers at 0.6640 (200WMA / Fibo 76.4% of 0.6706/0.6421 descend) where bulls may face headwinds, as daily studies are overbought and Friday’s profit-taking may also contribute to potential price easing.

Investors await release of (delayed) US Sep PCE price index, one of Fed’s inflation gauges, which is to provide additional information to US policymakers ahead of next week’s policy meeting.

Firmly bullish daily studies (multiple MA bull-crosses / strong positive momentum) underpin the action, with dips to ideally find ground above 0.6600 zone (broken Fibo 61.8% / hourly higher low / top of hourly Ichimoku cloud), while potential deeper pullback should be contained by top of daily cloud / broken Fibo 50% (0.6560) to still mark a healthy correction and provide better levels to re-enter strong bullish market for push towards 0.6706 (2025 peak, posted on Sep 17).

Res: 0.6660; 0.6688; 0.6706; 0.6730.
Sup: 0.6630; 0.6600; 0.6560; 0.6541.

Canada's economy added another 54k jobs in November (+0.3% month/month), 57k more than consensus expectations for a 2.5k decline. The details weren't quite as strong with full-time positions falling 9k, while part time added 63k.

The unemployment rate tumbled to 6.5% from 6.9% in October (consensus expectations were for a rise to 7.0%). Even better, the job finding rate (19.6%) was slightly elevated relative to last year and Statistics Canada noted that, "increases in the unemployment rate earlier in the year had been associated with lower job finding rates". The unemployment rate was helped lower by 26k workers who left the labour force. The labour force participation rate fell 0.2 ppts.

Job gains were concentrated in health care and social assistance (+46k), accommodation and food services (+14k), and natural resources (+11k). The biggest losses were in wholesale and retail trade (-34k).

Wage growth ticked higher in November, with average hourly wages up 3.6% versus a year ago (3.5% in October).

Key Implications

Oh boy, that's a pleasant surprise. Sure, the details suggest that part-time work is leading the charge on employment these past few months, but it's impossible to ignore that the jobless rate has fallen from 7.1% in September to 6.5% as of last month. The takeaway has to be that the Canadian labour market is in better shape than most had thought. That said, this situation can't be characterized as "good". The unemployment rate is still elevated, and job gains have been concentrated in part-time work. So, while this is an improvement, there is still room for recovery.

The Bank of Canada's next decision is due next week, and the past few employment reports have painted an encouraging picture of where the economy stands. However, there is still slack in the labour market and the trade picture heading into next year remains highly muddled. Our view is with the inflation rate expected to continue moderating, the Bank will remain on the sidelines next week and continue to look for signs that a sustained recovery is in the works.

Canada’s labor market delivered a major upside surprise in November, adding 53.6k jobs versus expectations of a small -1.5k decline. The strength came almost entirely from part-time positions, which rose by 63k, offsetting a modest dip in full-time work. The gain pushed the employment rate up 0.1% to 60.9%, marking a notable stabilization after a year of softening labor momentum.

The unemployment rate dropped sharply from 6.9% to 6.5%, defying expectations for a rise to 7.0%. This reverses part of the labor market deterioration seen through most of 2025, when unemployment climbed to 7.1% in September—its highest level since 2016. The improvement suggests that labor demand remains healthier than previously believed, even in a slowing economic environment.

Wage data also supported the stronger labor picture. Average hourly earnings rose 3.6% yoy in November, up slightly from October’s 3.5% yoy, reaching CAD 37.00.

Full Canada's employment release here.