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The Federal Reserve kicked off its monetary easing cycle with a 50 bp interest rate cut, taking the policy rate to 4.75%-5.00%. The FOMC cited "greater confidence" that inflation is moving sustainably to its 2% target and judged that the risks to its dual mandate are "roughly in balance". The committee sees rates falling another 50bp by year end.

Investors ended the week on a slight risk-off sentiment. With no major macroeconomic data releases on either side of the Atlantic, traders seemed to consolidate the gains made on Thursday following the Fed's large rate cut amid a heavy trading environment as Friday was the quarterly expiration date for several options.

Investors’ risk appetite soured yesterday. Sovereign bond yields rose across the board on both sides of the Atlantic. In the Eurozone, peripheral spreads widened a tad as French finance minister acknowledged the country's budget deficit could come in above 6% this year, leaving the 10-year French reference on par with the Spanish counterpart.

Activity in Spain’s agrifood sector is increasing at a faster rate than across the economy as a whole and the outlook for the 2024-2025 campaign is encouraging. Exports are holding up well in the adverse environment of recent years and the food price rally has begun to slow, although the cumulative increase since 2019 remains significant.

Financial markets had another mixed session on Tuesday, with little in the way of data releases to guide investors. In the money market, interbank rates moved higher on both sides of the Atlantic as investors reassessed their expectations for central banks' policy. Fed officials speaking yesterday stressed the importance of a cautious Fed in achieving its twin target.

Financial markets ended the week on a slightly positive note as the earnings season in the US kicked off with the big banks posting solid results. Investors also continued to digest inflation data received during the week which confirmed expectations of a 25bp rate cut instead of a 50bp cut from the Fed. 

Financial markets had a mixed session as traders weighed incoming macro data and corporate earnings announcements to gauge the state of the economy. The JOLTs report showed that US job vacancies fell in September, while the Conference Board consumer confidence for October surprised to the upside (as did the German Gfk sentiment index for November).

The ECB lowered interest rates by 25bp and left the deposit rate at 3%. The central bank also removed a reference in its guidance to keeping interest rates sufficiently restrictive, a sign that further policy easing is probably coming. Following the meeting, the probability of a 50bp rate cut in January, instead of 25bp, has risen from 30% to above 60%.

Financial markets ended the week on a cautious tone as investors fully digested the ECB's decision to lower interest rates and as they positioned themselves ahead of the Fed's FOMC meeting later this week given the latest prices data: higher-than-expected import and producer prices during November.

Tuesday's session saw a slight divergence in risk appetite on both sides of the Atlantic. In the US, a raft of data showed a dynamic economy: job openings unexpectedly rose in November; while the services PMI rose to 54.1 in December, and the prices paid component reached 64.4. Treasury yields rose on the news, with the curve steepening, weighing on equities.

Investor sentiment was mixed across the globe on Friday. In the eurozone, government bond yields rose as preliminary PMI data for January came in above expectations thanks to a slight improvement in the manufacturing sector to 46.1. US Treasury yields fell as both the services PMI and the U. of Michigan consumer sentiment index surprised to the downside.

The week started with a strong risk-off move, particularly in the US. In the eurozone, the Sentix index of investor confidence for March hit its highest level since 2021, while German industrial production for January came in above expectations. Sovereign yield curves flattened as the short end declined, while the long end and spreads were broadly flat.

Tuesday saw another volatile session in the financial markets. Risk appetite rebounded from the Asian session on hopes of Trump's willingness to negotiate tariffs with some partners, which extended into the European session and the start of the US session. Asian and european stocks rose and while eurozone government bond yields rose slightly.

The Federal Reserve kept the federal funds rate unchanged at the 4.25%-4.50% range and highlighted that the risks of higher inflation and higher unemployment have risen. The decision had been widely discounted by markets and had little impact on financial assets. Markets still expect three cuts in 2025, starting in July, and Treasury yields ended the session mostly flat.

Investors ended the week on a cautious, yet slightly positive note. All eyes were on the trade talks between China and the US that took place over the weekend. Trump floated in social media an alternative tariff level of 80% on Friday (compared to the current 145%). Both sides have touted progress in the talks, but have offered few details so far.

Investors ended the week with a risk-off session as trade tensions continued to escalate. Over the weekend, President Trump threatened 30% tariffs on EU and Mexican imports beginning August 1st. Stocks fell across the board, sovereign yields rose and the dollar strengthened, leaving the euro trading just below $1.17.

Investors ended the week with a mixed session. Euro area sovereign yields continued to rise on the back of a hawkish reading of the ECB's tone, while US yields had only modest gains following sessions with sharp declines ahead of the Fed's meeting. The euro-dollar cross remained at 1.17 and stocks were mostly flat on both sides of the Atlantic.