Risk events ramp up this week with multiple major central bank meetings and the release of US inflation data. Friday’s NFP report was no big market mover but on the margin to the soft side. Close to 300k new jobs, including revisions, is strong but at odds with a much weaker employment picture in the household survey.  The higher jobless rate and shrinking labour force were probably the major takeaways, and not a sign of strength.

According to money market pricing, this means a 25bps rate cut at the December FOMC meeting in ten days’ time is highly likely. Officials enter the blackout period ahead of that decision next Wednesday. There is little likelihood of the inflation data upsetting these odds, though another 0.3% m/m core CPI print is still too high over the longer term for the Fed to hit its 2% target. There is a general sense that monetary policy remains in restrictive territory, and policymakers think they should move it closer to neutral.

EUR/USD moved above 1.06 on Friday before closing below, ahead of Thursday’s ECB rate decision. The Governing Council is set to cut rates for a fourth time this year amid weak data and inflation around target. Whether a jumbo-sized 50bp rate reduction is discussed could hurt the euro. The ECB will likely stick with a quarter point move, and guide it is open to bigger cuts subject to incoming data.

There is a strong chance we get a 50bps cut from the Bank of Canada on Wednesday. Rate setters appear keen to get rates close to neutral quickly, due to weak growth and increasingly benign inflation. USD/CAD broke higher on Friday as it looks to make fresh highs above 1.4177. The RBA is expected to be a relatively quiet affair, with guidance continuing to push back against any pressure to ease policy in the short term.

In Brief: major data releases of the week

Tuesday, 10 December 2024

– RBA Meeting: Markets expect the Board to keep rates unchanged at 4.35% for a ninth straight meeting. The economy remains in a sluggish state after disappointing Q3 GDP. But policymakers are likely to keep a familiar tone, with the first rate cut not priced in until April next year.

Wednesday, 11 December 2024

– US CPI: Headline inflation is forecast to rise 0.2% m/m and 2.6% y/y. The core is seen increasing 0.3% m/m and 3.3% y/y. It’s now a very high bar to knock markets off a pretty much nailed on 25bps rate cut.

– Bank of Canada Meeting: Expectations moved towards a 50bps rate cut at this statement only meeting after Friday’s notable rise in the jobless rate. The recent uptick in inflation is the main argument for a smaller rate reduction.

Thursday, 12 December 2024

– Australia Jobs: Consensus sees 25k jobs added, up from the prior 15.9k The unemployment rate is predicted to tick up one-tenth to 4.2%. Seasonality around Black Friday could be the wildcard.

– ECB Meeting: Another 25bps rate cut is nailed on by money markets with a small chance of a 50bps move. Core and services inflation remain sticky but downside risks to growth have shown up in the most recent composite PMI falling below 50. The latest staff projections will be published.

Friday, 13 December 2024

– UK GDP: October GDP is expected at 0.2% m/m versus the 0.1% negative print in September. That measure saw the Q3 figure come in at 0.1%, mainly due to weak manufacturing.