All eyes on US CPI

In focus today

The most important data release of the day will be the US November CPI. We think inflation remained steady in headline terms (forecast: 0.2% m/m SA and 2.6% y/y vs. Oct: 0.2% m/m SA and 2.6% y/y). Core inflation likely slowed down slightly from the previous month (forecast: 0.2% m/m SA and 3.2% y/y vs. Oct: 0.3% m/m SA and 3.3% y/y). A reading in line with our forecast would support the case for a Fed rate cut at the meeting next week.

At 15:45 CET, Bank of Canada (BoC) will announce its rate decision. Consensus favours a 50bp cut, while markets are pricing in 41bp. We expect a 25bp cut, which would bring the policy rate to 3.50% amid the recent turn in inflation and potential spillovers from stronger US growth in 2025. However, risks are skewed towards a 50bp rate cut given the emphasis on excessive supply in the BoC's October MPR and last week's weak labour market data. As this is an interim meeting without any new MPR, we pay close attention to any signals in the press conference about the path of the cutting cycle in 2025.

Overnight we should get the policy statement from the Central Economic Work Conference in China, including economic priorities for 2025. We expect to see a clear sign of continued stimulus, but it is unlikely we get any specific details or numbers.

Economic and market news

What happened overnight

In Japan, wholesale inflation printed stronger than expected at 3.7% y/y (cons: 3.4%) and 0.3% m/m (cons: 0.2%), respectively. Trending higher for three months, the print supports our call for Bank of Japan to deliver a rate hike in December.

What happened yesterday

In the US, the NFIB small business optimism index jumped to 101.7 in November from 93.7 in December. However, this is not entirely surprising given that the survey's general 'uncertainty' index reached an all-time high ahead of the election. Easing political uncertainty supported most of the survey's sub-indices as well, as companies reported increasing hiring and price plans. While this surely is a bit concerning for inflation, we will likely need to wait for a few months for the election effects to fully fade.

In Denmark, CPI inflation was unchanged at 1.6% in November. While particularly food and summer house rentals were lower than expected, housing equipment pulled higher after price declines in October. The core m/m inflation print was approx. 0.

In Norway, core inflation surprised to the upside, printing 3.0% y/y (cons: 2.8%), aligning with Norges Bank's projection of 3.0% y/y. The largest upside surprise stems from domestic goods including food, and especially furniture, electronics and various household equipment. The surprising upticks could be due to a combination of cost push and improved pricing power, which could signal a turnaround in demand. A large part could easily also be attributed to Black Week-effects.

Overall, the release naturally should diminish the expectations for a cut in January. However, Norges Bank has put more emphasis on the balance of risk for the medium-term outlook for inflation. In that context, Thursday's Regional Network Survey, in particular the readings on capacity utilisation, wage growth and the labour market, are far more important for the forward guidance signals that we are going to get from Norges Bank next week.

In Sweden, the GDP, production and consumption indicators for October were surprisingly weak, printing -0.4% m/m, -0.8% m/m, and -0.3% m/m, respectively. For the GDP indicator, we saw substantial revisions with a large upward revision for August, resulting in a September print of -1.5% m/m. Looking at the rolling 3m changes, the picture is a bit less dire, but the start of Q4 is still not the one we looked for. While these monthly indicators are uncertain and often revised, the data at hand gives good reasons for the Riksbank to continue to cut rates to support the economic recovery.

Equities: Global equities were lower yesterday, marking a decline for the second consecutive day this week. Cyclical sectors, led by the high-flying technology sector, drove what was a broad-based decline. It is quite interesting to observe the market dynamics in this context. We argue that we received one of the clearest confirmations of Trump trade macro data yesterday, yet equities still closed lower. This concerns the NFIB index, which reported the highest monthly improvement on record, indicating a massive surge in confidence among smaller businesses, yet the equity markets barely took notice of the data. While there are compelling reasons to suggest that the initial phase of the Trump trade has been priced in, it is undeniable that the significant rise in the NFIB index makes a rally in equities in 2025 - and notably in small caps - much more probable, alongside continued job gains. In the US yesterday: Dow -0.4%, S&P 500 -0.3%, Nasdaq -0.3%, and Russell 2000 -0.4%.

FI: Global bond yields rose modestly ahead of the US CPI release today. The consensus expectations for the core-CPI are 0.3% m/m and 3.3% y/y for November relative to is 0.3% m/m and 3.3% y/y.

FX: Another relatively quiet day in G10 FX ahead of today's US CPI print and tomorrow's ECB meeting, marked by broad USD strength, particularly against AUD and NZD. EUR/USD edged slightly lower within the 1.05-1.06 range, while USD/JPY continued its upward trend as market expectations for a December BoJ hike shifted toward a hold. Scandies remained largely range-bound against the EUR, with EUR/NOK holding above 11.70 and EUR/SEK trading around 11.55.