This week's economic highlights are rate decision meetings by Fed, ECB & BOC. We expect the Fed to keep rates steady at the January FOMC meeting and provide limited guidance about future policy decisions. While Chair Powell may not rule out a March cut as he did last January, the broad signals from the meeting should confirm that outcome is not likely. To justify, Powell could emphasize the underlying strength of the economy and signs of stabilization in the labor market which reinforce patience in removing further restriction. ECB is likely to cut rates by 25 bps with no change in guidance as it was changed materially in Dec'24. We think disagreement among ECB members could become more obvious from March if the PMIs improve and services inflation momentum (on the ECB’s seasonally-adjusted measure) accelerates. We continue to believe EUR might test parity by H1CY25 as ECB might be forced to cut rates while Fed stays put. BOC is also likely to cut rates by 25 bps following two consecutive 50 bps cuts. Although Canadian rates market is currently pricing in only 60 bps of cut in CY25, we expect the terminal rate to be at 2.5% implying one cut more than the current market pricing. On macro data, we expect the Dec'24 core PCE to come at .21%. Super core services is likely to jump to .37% from .16% in Nov'24 due to elevated air fares. 1st advance estimate of Q4CY24 GDP for US is likely to come at 2.7% from 3.1% in Q3CY24 cementing further the US exceptionalism narrative. Fed Chair's Powell favorite Employment Cost Index is likely to rise at 0.9% QoQ from 0.8% in previous quarter. Initial jobless claims can surge to 255k due to LA wildfires & layoffs announced at Boeing. In dated treasury supply, there is total 183 BN USD of UST supply in 2,5 & 7 yr treasuries.
