EM currencies are generally ending the year on a strong footing – enjoying the benefits of lower core policy rates, a modestly weaker dollar and many offering high carry. There is a lot of focus on the renminbi at the moment and whether China's $1tr trade surplus will drive the renminbi much stronger. For today, the focus is on US jobs and eurozone PMIs
Wage growth is slowing quickly, at a time when the wider jobs market keeps cooling. The UK is becoming less of an outlier on inflation, and we expect a rate cut on Thursday and two further moves next year
The composite PMI dropped from 52.8 to 51.9 in December, with manufacturing output declining again. Overall, this reading still corresponds to decent GDP growth for the eurozone in the fourth quarter of 2025
A 25bp cut is practically certain. It's 90% discounted. Not delivering is not really a viable option, given the way the Fed behaves. But, expect a hawkish cut, with a pause to be heavily intimated for the January meeting. It will be interesting to see next Fed liquidity management steps; likely they will need to buy more bills than the MBS roll-off requires
France passed its social security budget, but the state budget remains unresolved, and the deficit outlook is worsening