Market Talk: US Inflation Data, Fed Policy, and Global Central Bank Moves

US Inflation and Federal Reserve Outlook

• 💡 The US November CPI report is due, but its reliability is questioned due to a government shutdown disrupting surveys.
• 🔍 Despite potential data incompleteness, the market is expected to watch the inflation print, though it's unlikely to alter the current market view on the Fed's next move.
• 📊 The Federal Reserve committee is split on policy views, with some members favoring aggressive rate cuts due to a loosening labor market, while others prioritize steady policy and focus on inflation.

Bank of England and Sterling's Trajectory

• 📉 Markets are largely pricing in a rate cut from the Bank of England today, with sterling already at its most bearish in five years.
• 🌍 Sterling is potentially on the back foot as a minority of G10 central banks are expected to continue cutting interest rates into 2026, including the Fed and the BoE.
• ⚠️ There's a possibility of pushback from other central banks against market expectations of rate hikes in 2026, suggesting potential positioning adjustments in the coming months.

European Central Bank and Bank of Japan Expectations

• 🎯 Rabobank anticipates that the ECB has completed its interest rate cutting cycle, with the next move expected to be a hike in early 2027.
• 🗣️ The ECB is expected to push back against speculation of rate hikes and underscore their current comfort with policy, likely holding rates steady through the next year.
• 📈 The Bank of Japan is widely expected to hike interest rates on Friday, reaching their highest level in three decades.
• 🇯🇵 Market expectations for a BoJ hike have solidified, and the focus will be on the pace of future hikes and the central bank's guidance, especially given recent positive economic data from Japan.