Global Markets Outlook: USD Strength, ECB and BoE Decisions, Inflation Data, Oil Prices

The focus of investors and forex traders is on November inflation data. On a year-over-year basis, the Consumer Price Index declined from 3.0% to 2.6%, while core inflation eased from 3.0% to 2.7%, below the forecast of 3.1%. Price pressures continue to subside, although they remain well above the 2.0% target. Nevertheless, the data strengthen expectations that the Federal Reserve may continue easing monetary policy at the beginning of next year. Also released today was the US jobless claims report: initial claims increased to 224.0K from 237.0K the previous week, the four-week average edged up from 217.0K to 217.5K, and continuing claims rose from 1.830M to 1.897M versus expectations of 1.930M.

Eurozone

The euro is weakening against the US dollar and the pound, while showing mixed performance versus the yen.

Investor attention is on today’s European Central Bank (ECB) rate decision. As expected, the regulator left rates unchanged: the main refinancing rate at 2.15%, the deposit rate at 2.00%, and the marginal lending facility at 2.40%. Officials reiterated that future decisions will be data-dependent. The ECB also updated its inflation and GDP forecasts: inflation is expected at 2.1% this year (unchanged), 1.9% next year (up from 1.7%), and revised down to 1.8% for 2027 from 1.9%. Eurozone GDP growth is now seen at 1.4% this year (up from 1.2%) and 1.2% next year (up from 1.0%).

United Kingdom

The pound is gaining against the euro and the yen, while showing mixed dynamics versus the US dollar.

Investors are assessing the outcome of today’s Bank of England meeting, where the policy rate was cut by 25 basis points to 3.75%. The vote was narrowly split, with five members supporting the cut and four opposing it. In its statement, the Bank noted that although inflation remains above target, it is now expected to return to 2.0% faster than previously anticipated. Officials cautioned that the pace of further easing will depend on the inflation outlook. Analysts note that lower borrowing costs should be welcomed by consumers, as they affect prices. Looking ahead, markets expect the BoE to maintain a dovish bias next year: Morgan Stanley forecasts three additional rate cuts in the first half of the year—in February, April, and June.

Japan

The yen is weakening against the US dollar and the pound, while showing mixed dynamics versus the euro.

Tomorrow at 05:00 (GMT+2), the Bank of Japan will announce its rate decision. Markets expect a 25 basis point hike to 0.75%, a 30-year high, despite weak economic growth. Higher borrowing costs could strengthen the yen and help curb inflation, which has remained above the 2.0% target for 43 consecutive months. However, the move may add pressure to GDP, which contracted in Q3. Investors will watch officials’ comments for guidance on future policy. Most analysts expect the next hike in June 2026, though views differ: ING Groep sees no tightening before October, while Bank of America expects another move as early as April.

Australia

The Australian dollar is weakening against the US dollar, the yen, and the euro, while showing mixed dynamics versus the pound.

December consumer inflation expectations from the Melbourne Institute (TDMI) rose from 4.5% to 4.7%, confirming increased price pressures in the Australian economy. The reading remains well above the Reserve Bank of Australia’s (RBA) 2.0–3.0 target range, increasing the likelihood that the policy rate will be kept unchanged or even raised in the first half of next year.

Oil

Oil prices are correcting modestly lower following the release of US inventory data.

According to the US Energy Information Administration (EIA), commercial crude inventories fell by 1.274 million barrels versus expectations of a 2.400 million barrel draw. Gasoline stocks rose by 4.808 million barrels (forecast: +2.100 million), while distillate inventories increased by 1.712 million barrels compared with expectations of a 1.200 million barrel build.