• Prior +2.8%
• Market index 194.5 vs 181.1 prior
• Purchase index 149.6 vs 144.5 prior
• Refinance index 445.8 vs 373.3 prior
• 30-year mortgage rate 7.07% vs 7.17% prior

This article was written by Justin Low at www.forexlive.com.

As a reminder, the debt brake serves to cap spending by the government and limits the country’s structural budget deficit. Scholz says that should the Ukraine conflict become worse, the government will have to respond by looking to declare an emergency exception for the budget – which will see the debt brake suspended as it has been since the Covid pandemic.

Scholz notes that the government will be saving €17 billion in its core budget and will also cut spending from its climate and transformation fund. For some context, Scholz was actually supporting the idea for another suspension of the debt brake whereas finance minister Lindner was against it. And that resulted in intense discussions and debate over the matter in recent weeks.

This article was written by Justin Low at www.forexlive.com.

• The BoE kept interest rates
  unchanged as expected at the last meeting.
• The central bank is leaning towards
  keeping interest rates high for longer, although it keeps a door open for
  further tightening if inflationary pressures were to be more persistent.
• The BoE members continue to repeat
  that they will keep rates high for long enough to get inflation back to target.
• The latest employment report missed
  forecasts with wage growth coming in much lower than expected and job losses in
  November.
• The recent UK CPI missed
  expectations across the board, which was a welcome development for the BoE.
• The UK PMIs beat expectations on
  both the Manufacturing and Services measures, with the Services sector crawling
  back in expansion.
• The latest UK Retail Sales missed
  expectations across the board by a big margin as consumer spending remains
  weak.
• The market expects the BoE to start
  cutting rates in Q2 2024

JPY

• The BoJ kept its monetary policy basically
  unchanged at the last meeting but formally widened the YCC to 1% on the 10-year
  JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again
  that they won’t hesitate to take easing measures if needed and that they are
  not foreseeing sustainable price increases.
• The latest Japanese CPIshowed that inflation pressures are easing although
  they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate
  remained unchanged near cycle lows.
• The Japanese Manufacturing PMI fell
  further into contraction, but the Services PMI ticked higher remaining in
  expansion.
• The latest Japanese wage data beat
  expectations and as a reminder the BoJ is focusing on wage growth to decide
  whether to tweak its monetary policy.
• The BoJ Governor Ueda last week
  delivered some interesting comments where it looked like the central bank was
  indeed considering rate hikes in 2024.
• The market expects the BoJ to hike
  rates in Q2 2024.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY tumbled for
hundreds of pips after breaking below the key support at the trendline and the
50% Fibonacci retracement level. This huge move was an overreaction to BoJ’s
Governor Ueda comments where he hinted to rate hikes coming in 2024. The price
then pulled back from overstretched levels into the blue 8 moving average where
we got a rejection. The next target for the sellers should be the 176.32 level.

GBPJPY
Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price
keeps on getting rejected from the trendline as the sellers continue to step in
with a defined risk above the trendline to position for new lows. The buyers
will need the price to break above the trendline to start targeting new higher
highs.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price might now consolidate between the trendline and the recent low at 182.30.
The playbook should be straightforward:

• A breakout to the upside should see the buyers
  piling in for a rally into the previous support now turned resistance around
  the 185.00 handle.
• A breakout to the downside should lead to more
  bearish bets and the sellers targeting new lows with the 176.32 level as the
  first target.

Upcoming Events

Today, we have the US PPI
data followed by the FOMC rate decision where the Fed is expected to keep
interest rates unchanged. Tomorrow, we have the BoE rate decision where the
central bank is expected to keep rates unchanged and later in the day, we will
see the latest US Retail Sales and Jobless Claims figures. On Friday, we
conclude the week with the Japanese, UK and the US PMIs.

This article was written by FL Contributors at www.forexlive.com.

The SNB will also be part of the mix and while not many are talking about the Swiss central bank, they are one of the few ones to have really surprised markets over the last two years. The latest one was to hold its policy rate unchanged at 1.75% in September here. So, are they now expected to be on pause mode for an extended period?

Let’s take a look at some analyst expectations going into tomorrow’s decision.

BofA

• Rates on hold at 1.75%
• SNB is likely on a longer pause than the ECB now
• No change in language surrounding the Swiss franc for the time being
• First rate cut only expected in Q3 2024

Goldman Sachs

• Rates on hold at 1.75%
• SNB to lower inflation forecasts, while acknowledging lower inflation in the Eurozone and US too
• No pressure for the SNB to cut as quickly as other central banks given „relatively low rate peak“
• First rate cut only expected in September 2024

UBS

• Rates on hold at 1.75%
• Inflation forecast to be revised lower
• SNB likely not decided on any FX intervention yet moving forward
• No changes expected to tiering framework
• First rate cut projected for June 2024, with policy rate seen at 1% in December 2024

Nomura

• Rates on hold at 1.75%
• SNB to communicate „weaker verbal commitment to FX sales“
• Swiss economy has a deflation problem rather than an inflation problem
• In that lieu, inflation likely to approach 0% again by the end of 2024
• SNB to revise lower its inflation forecasts
• First rate cut expected in June 2024

This article was written by Justin Low at www.forexlive.com.

• Prior -1.1%; revised to -1.0%

Euro area industrial output slumps by more than expected to start Q4, reaffirming the ongoing recession in the manufacturing sector. Here’s the breakdown:

This article was written by Justin Low at www.forexlive.com.