S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
CAC 40 — French Market Index
Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
Shanghai Composite — China Mainland
ASX 200 — Australian Market
TSX Composite — Canada Index
Nifty 50 — India Large Cap
STI Index — Singapore Market
KOSPI — South Korea Index
Bovespa — Brazil Equities
JSE Top 40 — South Africa Index
IPC Index — Mexico Market
US Dollar (USD) has stabilized following yesterday’s dip triggered by heightened political threat to the Fed’s independence. Even if checks remain – Republican resistance in the Senate and a non-autocratic FOMC – the politicization of the Fed weakens its inflation-fighting credibility which is a structural drag on USD. In the near-term, the recent upward adjustment to US rate expectations following a run of Goldilocks-type US economic data offers USD support, BBH FX analysts report.
Fed signals policy on hold amid moderating inflation
“Influential New York Fed President John Williams echoed the Fed’s on-hold guidance. Williams stressed that ‘Monetary policy is now well-positioned to support the stabilization of the labor market and the return of inflation to the FOMC’s longer-run goal of 2%’. Williams’ base case for 2026 is above-trend GDP growth between 2.5%-2.75%, inflation to peak at around 2.75-3.0% ‘sometime during the first half of this year, before starting to fall back’, and the unemployment rate to stabilize.”
“Fed funds futures price little chance of a cut at the next three FOMC meetings (January 28, March 18, and April 29). The next full 25bps cut isn’t priced until the June 17 meeting. Non-FOMC voters St. Louis Fed President Alberto Musalem and Richmond Fed President Tom Barkin speak today. US December CPI is the focus. Headline inflation is expected at 2.7% y/y for a second consecutive month, and core inflation is seen rising 0.1pts to 2.7% y/y. The Cleveland Fed’s Nowcast model forecasts both headline and core CPI at 2.6% y/y in December.”
“More importantly, upside risks to prices are fading and leaves scope for the Fed to ease policy. The ISM prices paid indexes point to moderating inflation pressures. Additionally, average hourly earnings growth (3.8% y/y) is running around sustainable rates consistent with the Fed’s 2% inflation goal given annual nonfarm productivity growth of around 2%.”
