Weekly Macro Recap: Rates, Inflation, Volatility

Introduction
Japan: Improving Data, Weak Currency
Canada: Cooling Inflation, Weak Consumer
Eurozone: Stabilisation Takes Hold
UK: Weak Labour, Policy Easing
United States: Growth Concerns Re-Emerge

Introduction

This past week delivered elevated volatility across global markets, driven by a dense economic calendar. Key releases ranged from NFP and CPI in the US to central bank decisions and inflation data across major economies, shaping expectations into year-end.

Japan: Stronger Economy, Weaker Yen

The week began in Japan with the Tankan Index showing improvement in both manufacturing and non-manufacturing activity, reinforcing the narrative of a gradually strengthening economy and increasing the probability of further tightening by the Bank of Japan.

Japanese CPI eased slightly to 2.9% from 3.0%, yet remained above the BoJ’s 2% target, suggesting inflation has stabilised at elevated levels.
As expected, the BoJ raised rates by 25 bps to 0.75%, but the accompanying statement and Governor Ueda’s press conference maintained a decidedly dovish tone.

This divergence triggered renewed weakness in the yen, pushing it back toward prior extremes and raising the risk of short-term FX intervention by the Ministry of Finance.

Canada: Inflation Stable, Demand Weak

Canadian inflation held steady at 2.9%, while the monthly print slowed to 0.1%, offering early signs of cooling.

However, retail sales remained weak at -0.2%, despite seasonal spending, highlighting fragile consumer sentiment and limiting any shift in near-term rate expectations.

Eurozone: Signs of Stabilization

Eurozone industrial production surprised to the upside at 2.0%, beating forecasts and reinforcing evidence of economic stabilisation.
Inflation eased slightly to 2.1%, hovering near the ECB’s target.

With growth and inflation aligning, the European Central Bank held rates steady at 2%, increasingly viewed as a neutral policy level.

United Kingdom: Cooling Accelerates

The UK labor market continued to weaken, with unemployment rising to 5.1% and payroll declines deepening.
Inflation fell sharply to 3.2%, undershooting expectations, largely driven by lower energy prices.

These conditions prompted the Bank of England to cut rates to 3.75%, signaling a neutral stance amid slowing growth.

United States: Growth Concerns Return

US data deteriorated into week’s end.
The New York Manufacturing Index collapsed into contraction, while the combined October–November labor report showed unemployment rising to 4.6%, exceeding the Federal Reserve’s 2025 projections.
CPI softened to 2.7%, reviving discussion of an earlier rate cut, potentially as soon as January if December data confirms the slowdown.

Final Takeaway

Markets are increasingly sensitive to labor market and inflation dynamics, with policy expectations diverging sharply across regions.
Volatility is likely to persist into year-end as traders reassess growth risks and central bank paths.

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