## United States
The week begins with a subdued economic calendar for the U.S., but the focus quickly shifts to key price measures expected on Wednesday and Thursday. Notably, there has been a rise in the unemployment rate from 4.1% to 4.2%, despite a slight drop in the labor participation rate (from 62.6% to 62.5%). This development has heightened expectations of a potential rate cut by the Federal Reserve next week. It’s worth considering the Atlanta Fed’s GDP tracker, which anticipates an impressive 3.3% growth rate for this quarter—an improvement from the 2.8% in Q3 and potentially the fastest since Q3 2023.
Given the optimistic financial backdrop—with record highs in the S&P and NASDAQ and Bitcoin surpassing $100k—the question looms whether the economy truly requires a loosening of monetary policy, even with acknowledgment of its delayed effects.
## Eurozone
This week, excitement in the Eurozone is centered around the upcoming meetings of the European Central Bank (ECB) and the Swiss National Bank (SNB) on Thursday, coupled with the UK’s October GDP data set for release the day before. The market is now largely convinced that the ECB will deliver a quarter-point rate cut. Although there was initial speculation of a more aggressive move, expectations have since stabilized. The swaps market anticipates approximately 125 basis points of cuts by mid-next year, with a terminal rate projected around 1.75%, notably 150 basis points below the current target.
Additionally, the SNB’s outlook presents intrigue, with market sentiment divided between a potential quarter- and half-point move. Exchange rate worries seem to weigh on the SNB given the franc’s recent 1.25% appreciation against the euro over the last month. Notably, Switzerland’s EU-harmonized CPI has been below 1% since August. With domestic goods prices down 0.9% year-over-year and service prices up 1.8%, a 25-basis point move from the SNB could carry significant weight, given their current deposit rate of 1.0%.
## United Kingdom
The UK’s October GDP data may create some headline risk, yet its influence on the Bank of England’s (BOE) deliberations appears minimal for now. There’s virtually no anticipation of a rate cut next week (December 19). BOE Governor Andrew Bailey has hinted at room for four rate cuts next year. However, the market seems to have already priced in such adjustments, with the swaps market accounting for about 85 basis points of cuts in 2025.
## China
China has kicked off the week by releasing its November inflation data, which saw consumer prices disappointing somewhat. The 0.2% year-over-year increase was only half of what was anticipated and marks the third consecutive decline. While weak demand is one narrative, it’s largely attributed to food prices. Notably, food price inflation slowed to 1.0% from 2.9%, while non-food prices remained flat after falling 0.3% year-over-year in October. Core prices, excluding food and energy, rose by 0.3%, the fastest pace in three months.
Producer prices have persistently fallen since October 2022, indicating a decline in industry profitability. The Politburo recently declared a shift towards “moderately loose” monetary policy, reiterating efforts to stabilize property and stock markets and emphasizing extraordinary counter-cyclical policies. This aligns with expectations of the central bank easing reserve requirements before year-end.
## Japan
Anticipation surrounding a potential rate hike by the Bank of Japan (BOJ) has been diminished slightly due to a planned mid-January speech by Deputy Governor Himino. The swaps market shows minor rate hike expectations for next week but more significant anticipation for January. Comments from Japanese officials could heavily influence market expectations this week ahead of the Tankan survey release.
## Canada
In Canada, Strong job growth continues with 54,000 full-time positions filled, marking nearly 200,000 new full-time posts over the last three months—the highest since the period ending January 2023. However, job creation lags behind workforce growth, pushing unemployment up to 6.8% from 6.5% as the participation rate climbed to 65.1% from 64.8%. Meanwhile, wage growth moderated to 3.9%, the slowest since April 2022. Expectations for a 50-basis point cut by the Bank of Canada have considerably increased, with odds surpassing 80%.
## Australia
The Reserve Bank of Australia (RBA) is expected to opt for stasis when it meets tomorrow, despite some economic headwinds in Q3. The fourth quarter has begun on a more favorable note, with stronger-than-expected retail sales and household spending, in addition to the most significant rise in goods exports since August 2023. These factors provide little justification for RBA Governor Bullock to alter the monetary stance.
## Mexico
In the North American landscape, Mexico is set to release its November CPI data today. As prevailing price pressures continue to ease, speculation grows regarding a rate cut by the Mexican central bank next week. Subsequent adjustments to the Canadian dollar sent it to a new yearly low, while the greenback surged, extending gains to near CAD1.4175 before pullbacks ensued.
