Digest – Week’s Low‑Key Tune and High‑Cost of Risk
Yesterday felt like that awkward first day of school – everyone was quiet, nobody knew what to do, and the looming “event risk” list felt a bit like a homework assignment nobody wanted to tackle.
Where We Stand
When you’re riding a wave of big‑event chatter, the markets often stay in the parking bay. That’s exactly what happened yesterday: a calm start, but the real drama is still on the horizon.
Still, the day wasn’t all on the sidelines. PMI Day 2024 kicked off market chatter, giving us a mini‑window into how businesses are feeling.
- UK and eurozone services bounced back over the 50‑point threshold – a sign that the economy is flirting with expansion.
- The composite output gauge hit a two‑month high at 49.5.
- Euro money markets, via the EUR OIS curve, trimmed their bets on a January 50bp ECB cut. The probability dropped to around 15% – a far cry from the “coin‑flip” odds of Friday.
- ECB President Lagarde’s comment that inflation risks are “two‑sided” further dampened the appetite for a big cut. (Spoiler: she didn’t wear a coat today.)
Forex Highlights
Even though the euro stayed stubbornly steady, the zone had a clear lesson: wait for the final FOMC decision before taking big swings.
- JPY slipped, trading north of 154. With the BOJ hinting at “no change” and the FOMC hinting at a build‑up, the yen might rewrite its own drama script in the next few days. If liquidity stays tight, we could see a push back toward 160 and the ultimate “MOF intervention” drama.
- CAD drifted down after Finance Minister Freeland’s resignation headlines. The market briefly hit a four‑and‑a‑half year high at USD/CAD. Two finance ministers in four years? That’s enough political drama for a TV series.
Wall Street wasn’t the only place with movement. The S&P bounced back after its first of four losing weeks, and the tech side kept rallying with the Nasdaq 100 leading the charge. We can feel the “path of least resistance” tugging higher. The market’s YTD stands at 30% up, but with few trading days left, it’s still uncertain if the bulls will keep snacking on dips as the year rolls to a close.
Look Ahead
Fasten your seat belts – the day is full of reports.
- The UK Labour Market Report kicks off. ONS is still wrestling with low survey response rates, so the policy message will likely be muted.
- In Germany, the IFO and ZEW sentiment surveys will come in. Pessimism nudges up again in December, which sounds about right given the current crisis in the manufacturing sector and the political uncertainty heading into the February elections.
- US Retail Sales is next. Sales jumped 0.6% MoM last month during the Thanksgiving/Black Friday period. If you’ve ever tried to predict the American consumer, remember: “Never bet against them.”
- On the same day, keep an eye on US Industrial Production, a 20‑year Treasury auction, and Canada’s November CPI print.
And a little reminder: you can get real‑time updates on this topic straight to your device. Just watch for those subscriptions – the best way to stay in the loop without turning into a data addict.
