Evolution of the international financial markets and evaluation of the main events and economic indicators of the previous day session. Available in English.
Financial markets continued to digest the Federal Reserve’s decision to cut interest rates. Sovereign bond yields edged lower in the euro area and were stable in the U.S., while the dollar extended its recent weakening trend, leaving EUR/USD trading near 1.175. Futures markets continued to price in two rate cuts for next year, despite a seemingly divided FOMC.
As expected, the Federal Reserve lowered the federal funds rate by 25bp to 3.50%–3.75%. Following the announcement, Treasury yields fell, U.S. equities advanced, and the dollar weakened, leaving EUR/USD trading near 1.17. After three consecutive rate cuts, the Fed signaled it will likely pause to assess how the economy evolves.
Investors traded cautiously ahead of today’s Fed meeting. Yesterday’s JOLTS report showed US job openings increased in October, indicating that the labor market isn't weakening abruptly and raising the risk that the Fed may strike a hawkish tone despite the widely expected rate cut later today. In response, Treasury yields edged higher and the dollar strengthened.
Investors kicked off the week on a cautious note, with attention set on upcoming monetary policy decisions. U.S. Treasury yields edged higher ahead of Wednesday’s Federal Reserve meeting, where a rate cut is widely expected (market-implied odds are near 100%) though uncertainty persists around the Fed’s forward path.
Investors traded cautiously as they positioned themselves ahead of the Federal Reserve meeting next week. US weekly unemployment benefit claims fell to a three-year low, casting some doubts over the Fed's willingess to lower rates. In this context, US treasury yields rose, equities were mostly flat, and the dollar edged higher against most peers.
US Treasury yields dropped along the curve after the ADP survey showed an unexpected decrease of private payrolls in November, suggesting further weakness of the job market and consolidating views on a rate cut by the Fed next week. In consequence, the dollar depreciated against all its main peers.
US Treasury yields ended yesterday's session mostly flat after the large sell-off they suffered on Monday. The market-implied probability of a Fed rate cut next week continued to stand close to 100%. The Japanese 2Y yield topped 1% early this week, its highest value since 2008, on continued expectations of a rate hike in two weeks.
Financial markets started the week with a subdued risk appetite. Sovereign bond yields rose across the board in developed markets. The sold off started in Japan, where it seems increasingly likely that the BoJ could rise rates in December. In both Europe and the US, November ISM and PMI data showed protracted weakness in manufacturing.
Friday's session was shorter in the US as markets closed at noon due to Thanksgiving's holidays. Treasury yields rose slightly and US stocks edged higher, with S&P 500 registering the largest gains in a 4-day stretch since May amid high expectations that the Fed will cut rates next week. The dollar continued to depreciate against its peers.
Financial markets had a subdued session on Thursday, with U.S. markets closed for Thanksgiving. In the euro area, sovereign yields edged slightly higher. Minutes from the latest ECB meeting confirmed a cautious stance on rates, though diverging views on inflation risks keep the door open for future cuts.
Financial markets had a mixed session on Wednesday. The US Treasury curve flattened, with short term yields rising due to stronger than expected data: initial jobless claims came in below expectations, and durable goods orders (excluding non-defense and aviation goods) for September posted a positive surprise.
Markets kept the positive tone on Tuesday, as Fed's Miran advocated for aggressive rate cuts. Separately, a flurry of US data suggested consumer fatigue (retail sales growth decelerated in September, and the Conference Board Consumer Confidence Index fell in November below expections), lifting expectations for a December rate cut and pushing Treasury yields lower.
Markets opened the week on a risk-on tone, as Fed's Waller also favoured a December rate cut, much like Williams had done on Friday. Waller favoured the cut on the basis of a soft and weakening labour market, which pushed US Treasury yields lower and brought market expectations of a cut in December to 75%.