It’s a busy week on the economic calendar, with the backlog of US data and a slew of central bank decisions giving traders’ plenty of things to chew over.
Let’s start with the US Non-Farm Payrolls (NFP) figures which were released on Tuesday (US time). October’s NFP of -105k points to continued weakness, however it was likely a distorted figure due to the government shutdown. November’s NFP of 64k was slightly above expectations but is still well below what could be considered the ‘neutral’ job creation level of around 100k. Probably the most notable development from the bundle of jobs figures released was the jump in the unemployment rate to 4.6%, which won’t have gone unnoticed by the more dovish members of the Fed board. All up, the jobs figures pointed to continued labour market softness, but probably not enough to warrant a January 2026 rate cut.
How did the market react to the US jobs data? Stocks were on the slide with investors slightly unnerved by the jump in the unemployment rate. Meanwhile the Dollar took a step lower with the jobs figures keeping expectations for further rate cuts intact. While last week’s FOMC meeting ‘dot plots’ showed that the Fed expect just one rate cut next year, markets are leaning towards there being two rate cuts, and the latest jobs data would appear to fit this narrative.
Gold walked rather than ran higher, with the softer USD making the path easier for the precious metal however the abating of safe haven demand is holding gold back. With Russia-Ukraine peace talks seemingly on track to perhaps end the conflict, and tariff worries, which dominated the headlines for much of 2025 now on the backburner, gold’s gains are harder to come by with safe-haven demand in limited supply. So, gold’s gains are primarily interest-rate driven at this point. Levels to watch include support at $4280, $4246 and $4283. Resistance around $4345 would first need to be overcome for gold to think about making a push back towards its all-time highs.
The Russia-Ukraine peace talks are also having an impact on energy markets, with crude prices trading at levels close to their year-to-date lows. Traders are at least partially, if not fully, pricing in the probability that Russian oil supply may resume to the broader global market should sanctions be lifted. However, a deal is not yet done so there remains the chance of a sharp reversal should the peace talks falter. But by all accounts, we are closer to a peace deal now than at any time since the conflict first started, as reflected by oil’s price descent.
US CPI data is due on Thursday which will be closely watched, with inflation expected to remain around the 3% level. Any significant deviation on either side could cause some repricing around interest rate expectations for 2026, however.
Central bank meetings from the ECB, BOE and BOJ are due in the remainder of this week. The ECB are expected to hold rates steady, while the BOE ae expected to cut rates by 25bps. But it is the BOJ meeting which may be the most intriguing of the three. The Japanese central bank is expected to raise rates this week by 25bp, justified by inflation stubbornly remaining at around 3% for more than three years.
But just how hawkish could the BOJ be regarding their forward guidance? With the new Japanese government embarking on a fiscal stimulus plan (requiring new bond issuance to fund the stimulus), and with Japanese bond yields already heading north (the 10-year JGB yield is approaching 2%), the BOJ may have to walk a fine line between addressing long-standing inflation worries but not spooking the market with an overly hawkish stance.
When the BOJ unexpectedly hiked rates at the end of July 2024, which was followed by a soft US jobs print, there was a large unwind of the carry trend which caused great global market turbulence (e.g. the Nikkei fell 12% in once day in early August of 2024).
Thus, we have already seen how the market can react when a BOJ rate hike is combined with a weak NFP result, albeit that a potential rise in Japanese interest rates is better telegraphed this time around. While I think we could hear more measured language from the BOJ this time around, JGB yields will be closely monitored in the wake of the BOJ meeting, as any further spikes could start to raise alarm bells for risk assets and put further pressure on carry trades. If Japan does indeed lift interest rates to a 30-yearhigh this week, the market’s reaction and tolerance may depend on how many further rate hikes are signalled by the BOJ. Let’s see what the BOJ has to say when they make the call on rates this Friday.
