Week Ahead
The US employment report (Tue), rate decisions at the ECB and BoE (Thu), along with the BoJ’s expected rate hike (Fri) will be key for markets this week.
Eurozone industrial production and US Empire manufacturing are due today, alongside remarks from the Fed’s Williams (again on Wednesday) and Miran. On Tuesday, Germany’s ZEW expectations survey, UK and US S&P Global manufacturing PMIs, UK employment data and US retail sales will keep markets busy. Wednesday brings Eurozone CPI, Germany’s IFO business climate survey and UK CPI. US CPI and initial jobless claims follow on Thursday. The ECB is widely expected to hold rates at 2%, leaving Christine Lagarde’s press conference as the main market focus. The BoE is expected to cut rates by 25bps to 3.75%, despite lingering inflation concerns. The week wraps up with Eurozone consumer confidence, UK retail sales, and US existing home sales and University of Michigan sentiment.
The FOMC cut the fed funds rate by 25bps to 3.50–3.75%, as expected, at its December meeting, marking a third consecutive reduction, prompting a rally in US Treasuries. Despite the move, the Fed retained its projection for just one further 25bps cut in 2026, even as market pricing points to more aggressive easing. The 9–3 vote split and revised statement language, signalling greater uncertainty around the timing of future adjustments, underscored internal divisions over whether labour market weakness or inflation presents the greater risk. The Fed also upgraded its 2026 growth forecast to 2.3% from 1.8% in September, while projecting inflation to ease to 2.4% next year from 2.6%.
Closer to home, UK growth disappointed, contracting 0.1%mom in October, marking the fourth consecutive month without growth. Missing forecasts for marginal expansion, analysts linked the slowdown to pre-Budget concerns over Chancellor Reeves' impending tax rises. The unexpected shrinkage underscores the current government's economic challenges and has led to increased speculation that the BoE may deliver an interest rate cut this week.
China’s economy showed mixed momentum in November, with softer-than-expected readings on consumption, investment and industrial output highlighting ongoing challenges, particularly in the property sector. Retail sales rose 1.3%yoy and industrial production increased 4.8%, while fixed asset investment contracted 2.6% over January–November, largely reflecting continued weakness in real estate. That said, policymakers have reiterated their commitment to supporting domestic demand through targeted fiscal measures, and robust exports continue to underpin overall growth, leaving the economy on track to meet its “around 5%” growth target despite near-term headwinds.
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