Central Banks in Europe Affirm Commitment to Current Policy
Despite the Fed’s pivot several months ago, caution is now advised as Europe’s central banks continue to embrace their current policy plans. The European Central Bank indicated that policy easing was not even discussed during a two-day meeting, while the Bank of England affirmed that interest rates would remain high for an extended period. Even Norway’s central bank raised rates. The euro experienced an overnight surge of 1.1%, while the sterling soared by 1.2% before leveling off in Asia on Friday. This added pressure to an already weakened U.S. dollar, which has fallen by 1.9% for the week and lingered close to a four-month low at 102.03 against major peers.
Treasuries on Track for Best Week in Over a Year
Despite the jubilant atmosphere in the markets, data revealed unexpected rebounds in U.S. retail sales for November and a drop in jobless claims. These indicators suggest that the economy remains strong and may not warrant the anticipated rate cuts next year. However, treasuries are still on track for their most successful week in over a year. The benchmark 10-year yields have plummeted by 30 basis points to dip below 4% for the first time since July. On Friday, treasuries relinquished some of their remarkable gains, with 10-year yields rising by 3 basis points to 3.9562%. Two-year yields also experienced a 2 bps increase to 4.4217%, with a decline of 30 bps for the week.
Crude Oil Prices Experience a Modest Increase
Crude oil saw a modest increase, with a rise of 0.3% to $71.57 per barrel, following a surge of over 3%. Similarly, Brent rose by 0.3%, reaching $76.83 per barrel.