Francesco Pesole

We should see little action before a busier second half of the week in the US and eurozone. If anything, the USD should see some support ahead of tomorrow’s inflation numbers. Inflation numbers in Hungary and the Czech Republic dominate the EM space

The dollar has come back bid this week. Any upside surprise to today’s US November core CPI number would trigger another leg higher in the dollar – as would only a 25bp rate cut from the Bank of Canada. This is because a 50bp rate cut is widely expected from the BoC and a more conservative 25bp cut could be read as concern over whether the Fed eases after all

As year-end fast approaches, central banks make their final monetary policy adjustments. Canada delivered a 50bp rate cut yesterday, while Brazil delivered a 100bp hike – because fiscal policy is too loose and inflation expectations have gotten out of hand. Today it’s all eyes on the ECB and the SNB. 25bp cuts are consensus, but 50bp is possible too

The dollar is largely holding onto gains as this week’s US inflation data has come in on the firm side and kept USD rates supported. EUR/USD bears have also survived the ECB test, where Christine Lagarde has not proved as dovish as some might have expected. The calendar is quiet today and again we see little reason to leave long dollar positions

The calendar is packed for this last full trading week of the year. Central bank rate meetings in the US and Japan take centre stage, but we’ll also see rate meetings in the UK, Sweden, Norway, the Czech Republic, and Hungary. Starting the week will be the December flash PMIs in Europe – the main question being whether or not they have deteriorated further

We expect a consensus 25bp rate cut this week in Sweden. Despite a soft start to the fourth quarter for GDP, forward-looking activity indicators are signalling that rate cuts are turning the tide for the Swedish economy, and we expect the Riksbank’s terminal rate at 2.0% – above that of the ECB. This can favour a moderately lower EUR/SEK in 2025

USD has continued to buck seasonal depreciating trends thanks to a still-high short-term swap rate. We expect a wait and see approach today ahead of the last key central bank events of the year over the next couple of days. Outside of the US, strategic CAD shorts are likely being added due to political turmoil, while strong UK wage data is keeping GBP bid

We expect the Federal Reserve to deliver a consensus 25bp cut today, but also to scale back on guidance for rate cuts next year. We think this will allow the dollar to stay firm into year-end as wide differentials remain highly favourable for the greenback. UK inflation rose as expected in November, which only changes the BoE’s picture slightly

USD/CAD is trading at the pandemic highs as the loonie is rapidly losing its low-volatility, safer commodity currency status due to Trump’s threat of 25% tariffs on Canadian goods. A fully-fledged North American trade war can take the pair to the 1.50 mark on the back of more Bank of Canada rate cuts. Political developments in Canada will be key next year

The Fed delivered a hawkish cut yesterday, signalling only 50bp of easing in 2025 and shifting to a more patient tone on easing. That has led to another dollar rally, which we see extending into the new year. A hesitant BoJ has added fuel to the USD/JPY bull run. Today, the macro year will be wrapped up with rate decisions in the UK, Sweden, Norway and Czechia