• Inability to clear major price levels may intensify downward pressure
• EU inflation data set for release this week

What Moved the Markets Last Week?

Germany’s November inflation accelerated to 2.6%, the highest reading in nine months, signalling that price pressures haven’t fully cleared as the ECB heads toward its 18 December policy meeting. The uptick appears linked to seasonal travel and fuel costs, although most economists still expect the broader downtrend in inflation to extend through 2025–26. Earlier in the session, France reported a sharper-than-expected fall in inflation, adding contrast within the Eurozone.

The US dollar held relatively stable on Friday but still closed out its weakest week in four months, with trading muted by thin post-holiday volumes and a temporary CME technical outage. The Canadian dollar outperformed its peers after GDP figures came in stronger than anticipated.

The latest Beige Book points to ongoing weakness in the US labour market, a key measure closely watched by Chair Powell. This softening backdrop is reinforcing expectations for a 25 bp rate cut at the Fed’s 10 December meeting. While this week’s ISM releases may paint a mixed picture, they are not expected to influence policy given that several major data points—such as October CPI—were delayed during the shutdown. Private-sector readings may remain uneven, with potential spikes in layoffs and softer ADP hiring, even as September core PCE likely held near 2.9%. With no clear catalysts, USD trading may stay directionless.

In the euro area, inflation for November is projected to hover a little above 2% before easing again into year-end, supporting the case for potential ECB rate cuts in 2025 even though policymakers remain cautious for now. Wage growth also seems to have cooled further in Q3. Switzerland’s inflation picture remains tame, with CPI expected to remain around 0.1% year-on-year.

The UK calendar brings little in the way of fresh drivers, and sterling has been unable to break through key resistance levels. Without momentum, GBP may drift lower as markets adjust their positioning and sentiment softens.

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