ECB to kick off hectic period of central bank announcements
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G10 currencies all traded in a holding pattern last week, as investors await the December meetings of the key central banks, including the ECB this week and the Federal Reserve and the BoE the next one.
As the year runs out, markets will turn their attention from politics back to central bank policy, at least temporarily. The world’s major central banks will meet between now and year-end, starting with the ECB on Thursday. Markets are pricing in a 25 bp cut with a small chance of something bigger, and we can’t disagree. Another data point will be the last inflation print in the US before the Fed’s December meeting on Wednesday. It would take a massive upward surprise to derail the expect 25 bp cut the following week.
Figure 1: G10 FX Performance Tracker [vs. USD] (1 week)

Source: LSEG Datastream Date: 09/12/2024
USD
The November payrolls report signalled a return to normality after the disruption caused by the hurricanes and the Boeing strike in the previous report. The US economy remains at full employment, and wages are growing healthily. The dollar initially sold off following the release of the data, perhaps on confirmation of the higher jobless rate print, although it quickly reversed course as markets reacted to the better than expected job creation and earnings numbers.
Figure 2: US Non Farm Payrolls (2021 – 2024)

Source: Bloomberg Date: 09/12/2024
The Federal Reserve will probably cut rates next week, but it remains to be seen how much further rates can drop given the macroeconomic context and the prospect for further inflationary policies from the Trump administration. In fact, the monthly core rate of inflation for November will likely print again near a 4% annualised rate in the monthly core rate, which we think is hard to square with a terminal rate much below 4%.
EUR
The collapse of the French government was largely priced in by markets, and the common currency actually ended the week posting a modest rebound against the dollar. Difficulties lie ahead, however, as the government has shown a complete inability to pass a budget for 2025, meaning that the onus on providing stimulus to the economy will lie squarely on the doorstep of the European Central Bank.
This week’s ECB meeting is key, of course, though institutional pushback against a 50 bp cut has led markets to almost rule out that outcome. Staff forecasts for growth and inflation will be key, in our view. Current levels of the euro are very low, and we would need to see some meaningful downward revision of those forecasts, particularly inflation, to justify any further downside from here.
GBP
Last week was unusually quiet for sterling, with no major macroeconomic news out. Governor of the Bank of England Andrew Bailey delivered some mixed messages for markets. He indicated that cuts on a quarterly basis were likely on the way next year – this is slightly more aggressive than the three currently priced in by swap markets. However, he also warned that the impact of the recent budget. which is seen leading to higher UK inflation, could lead to a more gradual pace of cuts.
The latest survey data has been soft, but hard data has been holding up better. Markets see no change in rates from the BoE next week, but are pricing in over an 80% chance of a cut in rates at the following meeting in February, with a terminal rate of around 4% being is one of the highests among the G10 countries. Decent economic numbers and relatively high interest rates should continue to support the pound throughout 2025.
RON
The political marathon was supposed to come to an end last weekend. This did not happen, however as the results of the first round of the presidential election in Romania were declared invalid by the Constitutional Court. Thus, the biggest political surprise in the country’s modern history was erased from the pages of history. Secret service reports presented to the Supreme Council of National Defence (CSAT) revealed misconduct in Călin Georgescu’s social media campaigns. They also pointed to the interference of a foreign state, likely the Russian Federation, in the results of these elections.
The voting will be held once again and candidates will go through the registration process once more. The rerun will take place in three to four months from the annulment of the first round. Meanwhile, in the Romanian political arena, attention will turn to the formation of a new coalition. Despite the strongest far-right result since the early 2000s (AUR with 18% of the votes), the government will most likely be formed by the pro-European PSD, PNL and USR.
PLN
A week of political turmoil ended with the strengthening of the zloty, which again proved to be one of the best performing currencies globally. The EUR/PLN exchange rate broke through the 4.26 level in the early morning hours today, increasingly boldly approaching the psychological barrier of 4.25, last exceeded in July. The bulk of the movement can be attributed to the MPC’s hawkish turn. Both the statement and the conference crowning the meeting brought surprising announcements, dissuading economists and investors from the widely expected resumption of cuts in March.
Attention focused on the NBP’s updated inflation projection, which assumes a decline in inflation in the first part of 2025 and its return to higher levels in the second half of the year. The revision is primarily driven by concerns about a significant rise in energy prices later on in the year – significantly exaggerated, in our view. Some of the voting members – including Henryk Wnorowski, Cezary Kochalski and Ludwik Kotecki – like ourselves, still regard the March discussion on interest rate cuts as rational.
In the coming days, the investors will analyse to what extent they believe in this hawkish turn, which may influence the strength of the Polish currency. External factors will not fail to attract attention either, led by Thursday’s (12.12) ECB meeting and Wednesday’s (11.12) US inflation reading.
HUF
Negative sentiment towards the forint prevailed with the currency being one of the worst performers in the world recently. Its depreciation continued in the past week, even despite better-than-expected hard macroeconomic data. We have observed a reversal of sorts today, however (EUR/HUF down by more than 0.7%), which can be linked to Moody’s withdrawal from the debt outlook downgrade. The agency highlighted the reduction in macroeconomic imbalances and a tight monetary policy, which was acknowledged by the investors.
The scale of the currency’s depreciation in recent weeks and expectations of a tight monetary policy being maintained for longer may offer the forint some support. The former may be supported by the inflation increase we expect on Tuesday. While some Forint gains in the short term will not surprise us, fiscal and political problems, alongside weak growth prospects do not fill us with optimism.