Ahead Today
G3: Bank of Japan Policy
Asia: Malaysia Trade, CNY FX Settlement
Market Highlights
Today will be the last Asia Daily publication before the December holiday period. We hope you have enjoyed reading our research, and we will resume in Jan 2026
Central bank rate policies continued on their path of divergence as the ECB held rates at 2.00% while the BoE cut their rates to 3.75%. The ECB upgraded their 2025 (1.4% vs Prior 1.2%) and 2026 (1.2% vs Prior 1.0%) growth forecasts, raising their 2026 inflation expectations (1.9% vs Prior 1.7%) as service inflation particularly has garnered attention from ECB President Lagarde. Even with service inflation (currently 3.5%) continuously overshooting the target, the ECB sees the trend slowing down "slightly" in 2026. Meanwhile, the Bank of England cautioned that future decisions on rate cuts were likely to be a "closer call" as compared to yesterday's meeting where the Committee voted 5 to 4 in favour of a rate cut.
US CPI y/y came in softer than expected (2.7% vs Est. 3.1%) but concerns over the quality of data arises due to the record-long government shutdown. Inflation in several categories that had long been stubborn seemed to disappear entirely, likely because the Bureau of Labor Statistics could not collect prices throughout the entirety of October and started sampling later than usual in November. Of particular concern was the rental component which assumed that there was no price growth for October.
Markets will focus on the Bank of Japan policy decision and the accompanying press conference. The BoJ today will likely raise its policy rate from 0.50% to 0.75% today, with swaps currently fully pricing in a rate hike. Comments about wage momentum will be closely watched - BoJ Governor Ueda earlier in the month opined that strong wage gains are likely to continue in the next year, opening more room for future rate hikes. Ueda's recent hawkish tone in his Nagoya speech earlier this month will be a benchmark for today's press meeting as markets await to ascertain whether the governor's hawkishness is likely to continue into 2026, even with PM Takaichi's accommodative policies.
Meanwhile, South Korea authorities are signalling more unease around the weakness of the South Korean won, and are mounting additional measures against won depreciation, deploying a mix of regulatory, institutional, and market measures. Authorities have eased FX rules to boost dollar liquidity and temporarily relaxed supervisory burdens on banks, aiming to attract capital inflows and stabilize the market. The presidential office is directly engaging major exporters to encourage USD-to-won conversion, while the Bank of Korea has signaled discomfort with current FX levels and is prepared to address both volatility and the currency’s level through policy coordination. The National Pension Service has reportedly sold dollars to support the won, and brokerages have halted new overseas equity marketing to protect retail investors from FX risks. Regulators are also cracking down on excessive competition and risky practices among securities firms, threatening severe penalties for violations. Despite these efforts, the won remains under pressure from persistent capital outflows and domestic investment trends, underscoring the need for credible, coordinated action to restore market confidence.