Ahead Today
G3: Eurozone consumer confidence
Asia: China industrial profits, BOK base rate
Market Highlights
Market expectations for a December Fed rate cut have swung sharply, with the latest pricing assigning roughly an 80% probability of easing, up from recent lows but still below the near-full pricing seen before the US government shutdown. Reports that President Trump’s economic advisor Kevin Hassett is a frontrunner for the Fed Chair have reinforced dovish sentiment. This has softened the US dollar and pulled the 10-year US Treasury yield down to around 4%. Improved risk appetite has buoyed US equities as investors position for a potentially more accommodative Fed policy stance.
However, US labour market signals remain mixed. The latest ADP report points to weakness in hiring, with private payrolls falling by an average of 13,500 per week over the four weeks ended November 8. However, initial jobless claims fell to 216,000 for the week ended November 22, down from 222,000 in the prior week.
Meanwhile, oil prices remain relatively weak amid signs of progress toward ending the Russia-Ukraine war. That said, key sticking points persist, particularly Russia’s demand for Ukraine to cede additional territory.
Overall, external pressures appear to be easing, supported by lower oil prices and the prospect of further Fed rate cuts, which together could support global risk sentiment heading into year-end.
Regional FX
Asian currencies have broadly strengthened against the US dollar this week. The Chinese yuan gained 0.5%, with positive spillovers to the Singapore dollar and Thai baht, both up around 0.8%. The PBOC’s continued lowering of the daily USDCNY fixing rate, now set below the 7.08 level, has further supported CNY strength.
In Korea, we expect the Bank of Korea to keep rates on hold amid rising housing prices and concerns over financial stability. Current FX volatility in USDKRW adds to the case for caution. While the BOK is likely to stand pat today, its forward guidance could still keep the door open for further rate cuts in 2026.
In Indonesia, officials anticipate Q4 GDP growth could accelerate to above 5.4%yoy, supported by government stimulus aimed at boosting domestic tourism. However, increased fiscal spending to meet ambitious growth targets raises the risks of higher inflation and fiscal slippage next year. While BI’s November rate hold may offer temporary support for the rupiah, we maintain our view that IDR could still weaken further against the US dollar in the coming months.