Markets
The front end of the European yield curve outperformed going into the weekend. Rates dropped almost 5 bps in the 2-yr German tenor, enough to lose the symbolical 2% barrier to close at a 2-year low. It followed European inflation numbers coming in at the expected 2.3% headline, which prompted ECB’s de Guindos and Villeroy but also Nagel downplaying the acceleration above 2%. Core inflation missed the bar slightly with an October-matching 2.7% instead of 2.8% expected. The ECB’s chief economist Lane in a podcast with the Financial Times talked about the matter and the implications for monetary policy. In comments recorded prior to the CPI release Lane said once inflation was sure to return to 2%, the ECB needs “to be driven by upcoming risks rather than being backwardlooking”. He refrained from giving time specifics but it suggests the central bank may already change some of its wording in the December policy statement so that “data dependence falls down in priority”. US yields were headed south as well. Net daily changes varied between 7.6 and 9.4 bps but we wouldn’t read too much into it. The US trading session was a shortened one due to Black Friday. The traditional start of the holiday shopping season was a strong one with sales growing at a faster pace this year. Joe Sixpack to the economy is a gift that keeps on giving. The dollar underperformed in currency markets, a product of falling yields and stock optimism. JPY was able to make the most out of it, thanks to consensus-beating Tokyo inflation numbers. USD/JPY dropped below 150. EUR/USD stranded just shy of 1.06 before going in reverse again this morning towards 1.052. French politics are once again cause of concern. Le Pen over the weekend said PM Barnier needs to amend the budget to some of the RN’s demands by today or have her Rassemblement National supporting a no-confidence motion. The finance minister Armand responded in a Bloomberg interview in early Asian trading by saying they won’t be blackmailed and don’t take ultimatums. French OAT futures currently tank, yields prepare for a sharply higher open. Spreads vs swap and German Bund are bound to rise. Watch out for French yields to surpass those in Greece. Last week was a dress rehearsal. The French theme will keep yields and the especially the euro in a tight spot at the very minimum in a daily perspective but more likely for the next two weeks going into December 12, when parliament gets to vote on the budget for a last time. In the US the monthly economic update kicks off with the manufacturing ISM today, followed by the services gauge and ADP job report on Wednesday and the official payrolls report on Friday. Fed’s Waller speech at "Building a Better Fed Framework: The AIER Monetary Conference" tonight is worth mentioning.
News and views
Rating agency Moody’s on Friday changed Hungary’s credit rating outlook to negative from stable. The rating was maintained at Baa2. It reflects the agency’s assessment related to risks related to the quality of Hungary’s institutions and governance. The country may ultimately lose out on a substantial amount of EU funds because it doesn’t meet the conditions for the release. Moody’s thinks this could also lower trend GDP growth and weaken fiscal and debt metrics. As this happens in a context of weak growth in Germany, an important trading partner, this could amplify the negative pressure on the economy. Moody’s mentions a potential sharp increase in government spending ahead of the 2026 parliamentary elections. The rating agency still sees a partial reversal in 2025 of the weakening in debt affordability from the past two years. At the same it mentions institutional weakness weighing on the debt profile, including in adherence to the rule of law, interference in civil society and concerns over central bank independence and monetary policy. The agency sees growth returning to an average of 3.0% in the 2026-28 period.
GDP growth in India slowed to 5.4% Y/Y from 6.7% Y/Y in Q3. Expectations were for a 6.5% Y/Y growth. Growth in the agricultural sector held up fairly well (3.5% Y/Y from 2.0%) but mining contracted 0.1%. Manufacturing slowed from 7.0% to 2.2% and growth in the sectors of electricity, gas and water (3.3%), construction (7.7% from 10.5%) and financial services/real estate (6.7%) were lower than Q2. On the demand side, private consumption growth slowed from 7.4% Y/Y to 6.0%, as did growth capital formation (5.4% from 7.5%). The disappointing growth performance might pressure the RBI of India not to wait too long with its easing cycle. The bank has kept its policy rate unchanged at 6.50% since February 2023. The rupee is setting new all-time lows against the dollar this morning (USD/INR 84.68).
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
Recommended Content
Editors’ Picks

AUD/USD weighed down by China, tariffs
AUD/USD remained on the back foot, slipping back to the area of multi-year lows around 0.5950 on the back of mounting fears surrounding tariffs and their impact on the Chinese economy.

EUR/USD refocuses on 1.1000 amid tariffs jitters
EUR/USD reversed two daily pullbacks in a row an d managed to advance to the boundaries of the 1.1000 barrier on the back of fresh weakness hurting the US Dollar and persistent tariff fears.

Gold erases gains, back to the $2,980 zone
Gold prices now lose extra ground and slip back to the area of daily troughs near $2,980 mark per troy ounce following an unsuccesful attempt to maintain the trade above the critical $3,000 level earlier in the day.

XRP drops 3% as Ripple announces $1.25 billion acquisition of prime brokerage firm Hidden Road
Ripple announced on Tuesday that it is acquiring prime brokerage firm Hidden Road to enhance its institutional offerings and increase the adoption of the RLUSD stablecoin and the XRP Ledger (XRPL).

The Fed is looking at a hefty price level
We are still in thrall to tariffs, the faux-macro “data” driving markets. The WSJ editorial board advised other countries to take their tariffs to zero so that Trump’s “reciprocal” tariffs will have to be zero, too. Cute, but no cigar.

The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.