Fed Could Raise Rates Aggressively if December Jobs Data Are Strong — Market Talk
0954 GMT - The Federal Reserve could increase interest rates at an aggressive pace of 50 basis points at the next policy meeting if U.S. jobs data due in December come in stronger than expected and if oil prices rise, MUFG Bank's Derek Halpenny says in a note. However, MUFG does not expect such a significant rate increase. Instead, it predicts a 25 basis points rate increase at the December meeting. "It's still more a risk than a core view but it would alter the current balanced expectations in the markets." ([email protected])0948 GMT - The dollar rises to a four-week high against basket of currencies on increased bets for a 25-basis-point interest-rate hike by the Federal Reserve in December following Tuesday's higher-than-expected U.S. inflation data. However, further gains are likely subject to stronger expectations of a 50-basis-point rate increase, DHF Capital S.A's Bas Kooijman says in a note. "With a December hike already the base case, further dollar gains may require stronger bets on a half-point move," he says. A firm PPI reading on Friday or hawkish Fed remarks could lift dollar, while softer data or resistance to a larger hike could unwind some of the currency's gains, he says. The DXY dollar index rises 0.2% to as high as 102.515. ([email protected])0935 GMT - Yields on short-dated U.K. government bonds, or gilts, could remain elevated due to expectations of high inflation, Mizuho's Evelyne Gomez-Liechti says in a note. "The inflation backdrop remains uncomfortable, with NIESR [National Institute of Economic and Social Research] now seeing inflation above target until 2030." Nonetheless, Mizuho expects the Bank of England to deliver fewer interest-rate increases than markets currently price in. Investors fully price in three BOE rate rises by the end of 2027, LSEG data show. ([email protected])0926 GMT - A sharply hawkish turn in market expectations doesn't bode well for Asian currencies, which turn broadly lower against the dollar despite the relief offered by a pullback in oil prices. Still, Maybank analysts stick to their view that Asian FX should mostly deliver a stronger year-end performance as oil retraces lower. In particular, they stick to long baht and Philippine peso recommendations, expecting both to outperform. The external positions of Thailand and the Philippines should hugely benefit from lower oil prices given their heavy dependency on energy imports, the analysts say. The dollar is flat at 33.60 baht, and up 0.3% at 63.15 pesos. ([email protected])0910 GMT - Hot inflation in the U.S. has Bitcoin traders bracing for a cold crypto Christmas, options on the Derive.xyz platform suggest. On. Nov. 4, traders were pricing a 53% chance of Bitcoin finishing above $80,000 by Christmas, and a 15% chance of a drop below $70,000. Those odds have now reversed, says Derive.xyz's Nick Forster. "Our options market is pricing a 31% chance of Bitcoin finishing below $70K, compared with just 26% for a finish above $80K," he says. With inflation running hotter than expected and a December Federal Reserve rate increase now priced in, traders are clearly becoming more defensive. The immediate focus is Friday's producer inflation report and whether Bitcoin can stabilize after five consecutive weekly declines, Forster says. Bitcoin last at $73,741. ([email protected])0846 GMT - Another weak quarter of growth in the Philippines prompts forecast cuts at BMI, a unit of Fitch Solutions. Analysts now project 2026 GDP growth at 2.6%, down from 3.0%, and well below the government's 3.5%-4.5% target. Sluggish consumption continues to be a drag, and high inflation looks set to keep eroding household purchasing power and discouraging spending. When the lagged effects of monetary tightening become more pronounced in the coming months, higher borrowing costs will also constrain demand, BMI adds. Labor-market weakness and deeply negative consumer confidence complicate the picture. The normalization of public capex, stalled by a corruption scandal, is key to the recovery, BMI says. It cuts its 2027 GDP growth forecast to 4.0% from 4.5%, but notes scope for exports and a spending rebound to improve momentum. ([email protected])0844 GMT - Markets bet on three interest-rate increases by the Bank of England by the end of 2027 due to inflation concerns after Tuesday's stronger-than-expect U.S. inflation data. The data revived concerns about high inflation, causing markets to price in more rate rises by the U.S. Federal Reserve and the Bank of England over the coming year. Investors price in a 62% possibility of a BOE rate rise in December, up from a 50% chance priced in prior to the data, LSEG data show. ([email protected])0826 GMT - Yields on U.K. government bonds, or gilts, are steady as markets await U.K. GDP data due to be released on Thursday. The data are likely to provide insights on the pace of possible future interest-rate increases by the Bank of England. The U.S. bond market is closed for Veterans Day. Ten-year gilt yields are little changed at 5.198%, Tradeweb data show. ([email protected])0815 GMT - U.S. based companies have issued debt amounting to a record 96 billion euros ($107 billion) in the euro credit market so far this year, ING's Timothy Rahill and Marine Leleux say in a note. This surpasses the 92 billion euros of debt issued by U.S. companies in Europe in 2025, the analysts say. Rapid growth in the AI industry has raised financing needs, leading companies to seek funds outside the U.S. ([email protected])0813 GMT - Eurozone government bond yields are little changed, struggling to find direction without guidance from U.S. Treasury markets which are closed due to Veterans Day holiday. The eurozone data calendar is thin, and so is the issuance pipeline. Only Germany lines up for government bond auctions, offering 1 billion euros in the May 2047 Bund and 1.5 billion euros in the August 2056 Bund. The 10-year Bund yield rises 0.1 basis point to 3.300%, according to Tradeweb. Ten-year bonds of countries facing fiscal challenges--France, Belgium, Italy--outperform currently, with their yields falling by more than 1 basis point.([email protected])0811 GMT - The outlook for the euro-dollar exchange rate could remain challenging until lofty U.S. interest-rate rise expectations are called into question, Commerzbank's Michael Pfister says in a note. U.S. core inflation unexpectedly remained at 0.3% month-on-month in October, the level at which Federal Reserve governor Christopher Waller said a 50-basis-points rate increase should be considered in December. Such a move seems unlikely but his comments highlight a shift toward considering more aggressive tightening, Pfister says. The euro has the disadvantage of inflation expectations being more closely linked to oil prices, which have eased, while the European Central Bank started tightening earlier so is unlikely to follow suit with the same vigor, he says. The euro falls 0.1% to $1.1155. ([email protected])0740 GMT - Sterling is expected to perform well against lower-yielding safe-haven currencies due to high yields on U.K. government bonds, Convera's Antonio Ruggiero says in a note. Nonetheless, expectations of higher Bank of England interest-rate rises are already priced, and therefore sterling has limited scope to rally further, Ruggiero says. Sterling is likely to trade between a range of 1.1920-1.2000 euros, he says. Sterling is last up 0.1% at 1.1953 euros. ([email protected])