Key Takeaways:
Strong US CPI release met expectations, with core inflation growing
Markets accelerated FOMC rate cut bets despite sticky inflation
OIS pricing implies a 98% chance of Fed cutting rates next week
ECB to focus on rate trim, Lagarde’s press conference, eurosystem forecasts
SNB delivered expected 50bps rate cut, franc strength a concern
BoC policy decision eased by 50bps, set for further easing in 2025
Inflation nearing 2% in the region- Analysts predict quarter-point reduction in deposit rate
U.S. PPI figures released, market expecting Federal Reserve rate cut in December- Wall Street rally affecting European shares positively
- Yuan stabilizes after PBOC fixing and pressure amid U.S. trade war concerns
Key market influencers: SNB and ECB policy decisions, CPI releases, US PPI data
Eurozone Economy Faces Uncertainty Amid Central Bank Rate Cuts
The Eurozone economy is currently facing a period of uncertainty as major central banks, including the European Central Bank (ECB) and the Swiss National Bank (SNB), have delivered expected rate cuts. These rate cuts are in response to concerns about economic performance and inflation levels in the region.
The strong US Consumer Price Index (CPI) release, meeting expectations with core inflation growing, has led to an acceleration of bets on a Federal Open Market Committee (FOMC) rate cut, despite some stickiness in inflation. Market indicators such as Overnight Index Swap (OIS) pricing imply a high probability of the Federal Reserve cutting rates in the coming week.
In the Eurozone, the focus is on the ECB’s upcoming decisions on interest rates, Lagarde’s press conference, and the eurosystem forecasts. Analysts are predicting a quarter-point reduction in the deposit rate, with potential for further easing in the future. The ECB is expected to cut rates for the fourth time this year, aiming to loosen constraints on the struggling Eurozone economy.
The situation is further complicated by uncertainty surrounding the depth of rate cuts, with some speculating the potential for half-point cuts. The Eurozone is also experiencing political crises in countries like Germany and France, adding to the economic challenges faced by the region.
As markets anticipate further easing measures until June and additional cuts later in 2025, all eyes are on major milestones for the euro, including its performance against the dollar and pre-Brexit levels. The recent release of US Producer Price Index (PPI) figures has also influenced expectations of a rate cut by the Federal Reserve in December, further impacting global markets.
Amidst these developments, the stabilization of the yuan after the People’s Bank of China (PBOC) intervention and pressure from US trade war concerns is another factor to watch closely. The key market influencers currently revolve around central bank policy decisions, inflation data releases, and overall market sentiment.