Eurozone data on Friday won’t give the ECB doves much to work with. The latest Q3 numbers showed GDP revised higher and wage growth refusing to cool – exactly the kind of mix that will keep the ECB against any further easing.
In Germany, Chancellor Merz narrowly pushed his pension bill through parliament, avoiding a coalition collapse. But the slim margin exposes cracks in his authority and hints at tougher battles ahead on welfare cuts and deeper pension reform – political noise the EUR really didn’t need.
Across the pond, September’s US income and spending figures won’t shift expectations going into this week’s FOMC meeting. Core inflation is still too sticky for the hawks, while softer real spending gives the doves something to cling to – but neither camp gets enough ammo to change the Fed’s near-term path.
*Daily move - against G10 rates as of 06:00 GMT, 08.12.25
** Indicative rates - interbank rates as of 06:00 GMT, 08.12.25
Early this morning ECB member Isabel Schnabel said she would be comfortable with bets suggesting the next interest rate move will be an increase. Data this week is expected to show German industry remains stuck in first gear with October data likely to show no meaningful pickup as US tariffs continue to bite. Any real recovery is more of a 2026 story and even then, the bounce is expected to be modest despite fiscal support.
In the UK, October GDP should show a small rebound after September’s slip, but consumer caution is still acting as a brake on growth.
Central banks are in focus this week as well. In Switzerland, the SNB is expected to sit tight with rates at 0%, steering well clear of negative rates. The Reserve Bank of Australia is expected to hold rates at 3.6% and there could be a risk that Governor Bullock could be more hawkish following recent upside surprises in jobs and CPI numbers. Thus, we could see a stronger AUD this week.
The Fed is expected to cut rates by 25bps on Wednesday evening. A 25 bp cut is fully priced for the December 9-10 FOMC, but the tone is uncertain, with possible dissents and Powell seen as a lame-duck ahead of an expected leadership change to Kevin Hassett. The dot plot will likely stay unchanged, signalling just one cut in 2026. With a higher unemployment forecast and stronger growth projections, the message could lean hawkish.
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