Over the weekend, geopolitical news dominated as the fall of El Assad in Syria and the political clashes in South Korea added to a "Risk Off" attitude. Overnight, China’s consumer inflation decelerated in November, signaling that government efforts to support the economy and sentiment haven’t been enough to counter weak demand. The consumer price index rose just 0.2% year-on-year, below expectations of 0.4%. Factory deflation continued for the 26th consecutive month, although the 2.5% drop in the producer price index was slower than October’s 2.9% decrease. Deflationary pressure in the economy remains persistent.
The festive season is not yet in full swing. In the week ahead, we have key central bank meetings from the RBA, BoC, SNB, and ECB, to name a few. The RBA is expected to leave rates unchanged at 4.35%, while the Bank of Canada is forecasted to cut rates by 50 basis points. Meanwhile, the Banco Central do Brasil is expected to push rates up to 12.00%. However, for me, the ECB meeting is the bigger event. The ECB holds its final policy meeting of the year on Thursday, with expectations for another 25-basis-point rate cut, marking the fourth such cut this year. The ECB is also set to release updated growth and inflation forecasts, which are likely to be revised lower for next year.
Since the ECB’s last meeting in October, tariff risks for Europe have risen following Trump’s election win. France and Germany are grappling with political turmoil, business activity has slowed sharply, and the euro has weakened. ECB President Christine Lagarde has stated that a trade war would be a "net negative for all," not just for countries targeted by U.S. tariffs.
As for today, we have U.S. wholesale inventories, a speech from the BoE's Ramsden, and Mexican CPI. It’s the ideal day to do your research and prepare for the rest of the week. Have a good day!
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