Williams Rekindles December Fed Cut Bets, Markets Scramble to Reprice – Action Forex

New York Fed President John Williams delivered the day’s biggest surprise, signaling that he sees scope for another rate cut in the near term. As head of the New York Fed — a permanent FOMC voter and a traditional bellwether for committee consensus — his comments dramatically shifted the policy conversation. Only yesterday markets were digesting a message of caution from the October FOMC minutes; today, traders are again contemplating the possibility of an imminent easing step.

Pricing in the futures market flipped almost instantly. Expectations for a December rate cut surged from 35% to about 70%, marking one of the most abrupt single-session repricings in weeks. The rapid repricing underscored not only the influence of Williams’s stance but also the market’s latent readiness to pivot back toward an easing narrative after a week of mixed signals from policymakers.

The shift in expectations also helped snap Wall Street out of its AI-driven selloff. U.S. equity futures jumped meaningfully, pointing to a strong rebound at the open. Still, whether the optimism can carry through the rest of the day is unclear. Investors may be more inclined to treat Williams’s comments as a tactical boost rather than a structural re-anchoring of the outlook.

Currency markets, however, displayed a more tempered reaction. Dollar slipped briefly after the headlines but quickly recovered. The greenback remains firmly the best performer of the week. Loonie and Sterling are currently the next strongest.

Swiss Franc has now fallen to the bottom of the performance board as the Yen — which had been hammered for days — finally showed signs of stabilization and clawed its way off the floor. Still, the fact that Aussie holds the third-weakest position signals that risk undertones remain soft, even as stock futures point higher. Kiwi and Euro continue to hover mid-table.

In Europe, at the time of writing, FSTE is down -0.09%. DAX is down -0.47%. CAC is down -0.08%. UK 10-year yield is down -0.042 at 4.547. Germany 10-year yield is down -0.026 at 2.698. Earlier in Asia, Nikkei fell -2.40%. Hong Kong HSI fell -2.38%. China Shanghai SSE fell -2.45%. Singapore Strait Times fell -0.95%. Japan 10-year JGB yield fell -0.033 to 1.788.

Fed’s Williams sees room for another rate cut in the near term

New York Fed President John Williams maintained a cautiously dovish tone today, saying he continues to view U.S. monetary policy as “modestly restrictive.” With that in mind, he sees room for “a further adjustment in the near term” to bring the federal funds rate closer to neutral.

Williams reiterated his confidence that inflation will moderate as tariff effects filter through the economy without generating lasting price pressures. At the same time, he emphasized that the labor market appears to be cooling in a controlled manner.

The unemployment rate reached 4.4% in September, a level he noted was comparable to pre-pandemic norms—when the job market was healthy but “not overheated.”

Canada’s retail sales fall -0.7% mom in September, flat in October

Canada’s retail sector weakened in September, with headline sales falling -0.7% mom to CAD 69.8B, in line with expectations. The decline was broad-based, with six of nine subsectors posting decreases, led primarily by motor vehicle and parts dealers. When excluding autos and gasoline, core retail sales were essentially flat. In volume terms, retail sales slid 0.8% mom, marking a clear step down in real consumption.

On a quarterly basis, nominal retail sales eked out a 0.2% gain in Q3, but volumes declined -0.3%, showing that inflation-adjusted spending continues to stagnate.

The advance estimate for October suggests no meaningful improvement, with retail sales expected to be broadly unchanged.

Eurozone PMI composite climbs to 53.1, but manufacturing still far from a turnaround

Eurozone business activity lost a little momentum in November as PMI Composite edged down from 52.5 to 52.4. Manufacturing slipped back into contraction at 49.7, down from 50.0, a five-month low. Services inched up from 53.0 to an 18-month high of 53.1.

Hamburg Commercial Bank’s Chief Economist Cyrus de la Rubia noted that manufacturing remains “marooned in a no-man’s land of directionlessness,” with soft demand showing up in yet another decline in new orders. He warned the sector is still “months, possibly even several quarters” away from a sustained turnaround, pointing to deteriorating conditions in both Germany and France. Indeed, Germany’s PMI Manufacturing fell from 49.6 to 48.4 and France dropped from 48.8 to 47.8.

By contrast, services continue to provide a much-needed buffer. Germany’s service-sector growth slowed (down from 54.6 to 62.7) but stayed comfortably positive. France returned to expansion (up from 48.0 to 50.8). With the services sector carrying far more weight in the Eurozone economy, the currency bloc is still on track for faster growth in Q4 compared with Q3.

UK PMI drops to 50.5; Sluggish growth and softer prices bolster December BoE cuts

UK flash PMIs for November delivered a broadly downbeat signal on the economic outlook. Manufacturing managed to edge back into expansion territory, rising from 49.7 to 50.2 — its highest level in 14 months. But that improvement was overshadowed by a sharp drop in services activity, with PMI Services sliding from 52.3 to 50.5, a seven-month low. As a result, Composite PMI fell notably from 52.2 to 50.5.

According to Chris Williamson of S&P Global Market Intelligence, the latest readings point to an economy that has “stalled,” with job losses accelerating and business confidence deteriorating sharply. The PMI readings are broadly consistent with zero GDP growth for November and only around 0.1% growth so far in Q4.

While part of the slowdown is being blamed on paused spending decisions ahead of the Autumn Budget, weakening confidence suggests the hesitation may “turn into a downturn” if households and firms brace for new “demand-dampening measures” .

The inflation outlook also softened meaningfully. Selling price inflation dropped to its lowest in almost five years, with goods prices falling at the fastest rate since 2016 and service-sector pricing power weakening.

Taken together, the PMI data reinforce expectations that the BoE would cut rates in December, especially if next week’s Budget reinforces the pessimistic tone.

UK retail sales slump -1.1% mom in October as shoppers hold off for Black Friday

UK retail sales delivered a sharp downside shock in October, falling –1.1% mom, well below expectations of a modest 0.1% increase. It was the first monthly decline since May and reflected broad weakness across supermarkets, clothing, and online retailers.

Some retailers suggested that consumers deliberately postponed purchases in anticipation of Black Friday promotions, magnifying the pullback at a time when household budgets remain stretched by high interest rates and inflation.

Despite the poor monthly reading, retail sales in the three months to October were still up 1.1% compared with the prior three-month period.

BoJ’s Ueda flags bigger FX pass-through to underlying inflation

BoJ Governor Kazuo Ueda told parliament today that Yen weakness is increasingly feeding into domestic inflation. He noted that as companies have become “more active in raising prices and wages,”  the pass-through from higher import costs to consumer inflation has intensified. That dynamic raises the risk that currency-driven price gains could influence inflation expectations and “underlying inflation,” he warned.

Ueda added that the central bank will assess a rate hike at upcoming meetings, with the focus firmly on data that sheds light on next year’s wage momentum. He emphasized said policymakers want to “spend a bit more time to confirm whether firms’ active wage-setting behavior won’t be disrupted,”

He added that the Bank is still gathering information from its nationwide branches and intends to incorporate both official data and its own surveys into the next policy discussions.

Japan CPI core accelerates again to 3% in October

Japan’s October CPI data showed inflation firming again, with core CPI (ex-fresh food) rising to 3.0% yoy from 2.9%, matching expectations and marking the second month of renewed acceleration. The measure has now stayed above the BoJ’s 2% target for more than three and a half years, highlighting how persistent the price backdrop has become.

Core-core CPI, which excludes both fresh food and energy, edged up from 3.0% to 3.1% yoy, while headline CPI rose from 2.9% to 3.0%.

Food excluding fresh items surged 7.2%, and utilities rose 2.2%, confirming that household-facing inflation pressures remain elevated. Rice inflation, however, continues to ease sharply, slipping to 40.2% from September’s 49.2% and offering slight relief after months of extreme gains.

Japan PMI composite rises to 52.0 as services lead and manufacturing stabilizes

Japan’s November flash PMIs offered a cautiously constructive signal for the economy, with the Composite Index rising from 51.5 to 52.0 — the best reading in three months and joint-highest since August 2024. Manufacturing activity remained in contraction but improved to 48.8 from 48.2. Services held steady at a solid 53.1.

S&P Global’s Annabel Fiddes noted that the decline in manufacturing output eased to its slowest pace since August, hinting at a gradual move toward stabilization. Business confidence also strengthened, reaching its highest level since January. That pickup in sentiment helped drive the strongest rise in employment since June, as firms look to expand capacity in anticipation of firmer activity ahead.

Inflation pressures remain a lingering concern. Input costs rose at the fastest rate in six months amid higher labor expenses and supplier price increases. In response, firms lifted selling prices at a solid pace to protect margins.

Australia’s PMI composite rises to 52.6, firmer growth with manufacturing rebounds

Australia’s November flash PMIs delivered a surprisingly upbeat signal, with manufacturing jumping back into expansion at 51.6 after October’s soft 49.7. Services PMI also nudged higher from 52.5 to 52.7, lifting Composite Index from 52.1 to 52.6. The rebound in manufacturing is particularly encouraging given the sector’s recent weakness.

S&P Global’s Jingyi Pan noted that new orders in goods returned to expansion for the first time since August, helping lift overall momentum. Rising business optimism—now at a five-month high—also points to firmer activity ahead.

Price pressures, while slightly firmer than at the start of the quarter, remain “broadly muted”. Employment growth slowed, but survey responses indicate this was driven partly by “hiring challenges” rather than a sharp loss in demand, particularly in the services sector.

NZ sees strong EU export growth, yet trade balance hit by China import surge

New Zealand’s October trade report showed exports and imports both rising solidly from a year earlier, yet leaving the country with a monthly deficit of NZD -1.5B. Goods exports climbed 16% yoy to NZD 6.5B, driven by broad-based strength across key markets. However, imports grew nearly as fast—up 11% to NZD 8.0B—as demand for overseas goods remained firm, particularly from China.

Export performance was strong across most major destinations. Shipments to China rose 18% yoy, while exports to Australia increased 14%. Notably, exports to the EU surged 40%—a standout gain that helped offset softer growth in other regions. The U.S. and Japan also saw moderate increases of 5.4% and 7.5% respectively.

On the import side, the story was more uneven. Imports from China surged 29% yoy and those from Australia rose 6.8%, pushing the total higher even as purchases from several other partners fell. The U.S. and South Korea both saw sizeable declines in imports, down -15% and -19% respectively, while the EU recorded a small drop of -2.6%.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1504; (P) 1.1527; (R1) 1.1551; More…

Intraday bias in EUR/USD remains mildly on the downside for 1.1467 first. Firm break there will target 1.1390, and then 38.2% retracement of 1.0176 to 1.1917 at 1.1252. On the upside, above 1.1551 minor resistance will turn intraday bias neutral. But risk will stay on the downside as long as 1.1655 resistance holds, in case of recovery.

In the bigger picture, considering bearish divergence condition in D MACD, a medium term top is likely in place at 1.1917, just ahead of 1.2 key psychological level. As long as 55 W EMA (now at 1.1328) holds, the up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2000 will carry larger bullish implications. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.