United States of America

USD is weakening against JPY and is ambiguous against EUR and GBP.

Labor market data will be released next week, the last before the US Fed’s December meeting. Note that the private consumption expenditure price index increased from 2.1% to 2.3%, and the core value increased from 2.7% to 2.8%. If employment figures are strong, both key conditions will prevent further easing of monetary policy, and the prospects for a –25 basis point interest rate adjustment in December will lose certainty. Most experts are counting on it for now but they believe that at the beginning of next year, regulators will pause to assess the possible consequences of the trade policy decisions announced by the administration of newly elected President Donald Trump.

Eurozone

EUR is weakening against JPY and is ambiguous against USD and GBP.

The EU consumer price index fell from 0.3% to –0.3% and from 2.0% to 2.3% YoY, while the core indicator fell from 0.2% to –0.6% and remained at 2.7% instead of the expected 2.8%, respectively, which could strengthen the confidence of European Central Bank (ECB) officials in the need for a 25 basis point interest rate cut in December. Experts expect that the regulator will not go for a sharper easing of monetary policy, although some members of the bank’s board do not rule out such a possibility. Thus, yesterday, the head of the Bank of France, François Villeroy de Galhau, said that the possibility of a December change in the cost of borrowing by –50 basis points still remains. In addition, German retail sales fell 1.5% MoM, beating forecasts for 0.5%, and rose only 1.0% compared to the preliminary estimate of 3.2%.

United Kingdom

GBP is weakening against JPY and has ambiguous dynamics against USD and EUR.

The Bank of England’s semi-year report on the state of the country’s financial system was published today: according to the document, raising trade barriers could negatively affect global growth and increase uncertainty about the dynamics of inflation, which in turn could lead to volatility in markets and higher borrowing costs for businesses and consumers. Also, a decrease in international political cooperation could prevent authorities from improving the resilience of the financial system and its ability to withstand future shocks. Despite this, the Bank of England said that resilience tests of British banks confirmed that they are well-capitalized and have a high level of liquidity.

Japan

JPY is strengthening against USD, GBP, and EUR.

The positive dynamics are developing against increasing market confidence in the December interest rate hike by the Bank of Japan. The November consumer price index in the Tokyo metropolitan area, published today, corrected from 1.8% to 2.6% YoY, and the core indicator – from 1.8% to 2.2%. Thus, the indicators exceed the target of 2.0%, while not only the cost of food but also services is increasing, which allows maintaining the “hawkish” rhetoric. It was confirmed by the head of the regulator, Kazuo Ueda, last week. Currently, the probability of an interest rate hike by 25 basis points in December exceeds 50.0% but then officials may take a long pause, assessing the impact of new economic steps by US President-elect Donald Trump on the Japanese and global economies.

Australia

AUD is weakening against JPY and has ambiguous dynamics against EUR, GBP, and USD.

In October, mortgage lending remained at 0.5%, while the private sector indicator increased by 0.6%, exceeding preliminary estimates of 0.5%. Overall, the figures are stable and are unlikely to affect the intention of the Reserve Bank of Australia (RBA) officials to continue to hold peak interest rates. Most experts expect the agency to begin easing monetary policy no earlier than May.

Oil

The morning decline in oil prices has given way to growth, although the fundamental background remains negative for the market.

Thus, prices are under pressure amid the conclusion of a truce between Israel and the Lebanese paramilitary organization Hezbollah. Although it is not observed fully, the intensity of hostilities on the Lebanese-Israeli border has significantly decreased, allowing investors to hope for a reduction in the risks of problems with the supply of raw materials from the region. Currently, experts are waiting for the meeting of the OPEC members, postponed to December 5. It is assumed that producers will change the dates for lifting restrictions on hydrocarbon production for February, which, according to analysts, will not be able to compensate for the observed excess supply.