This week’s holiday-shortened economic calendar is light given that Fed officials will be in their self-imposed communications blackout ahead of next Wednesday’s FOMC meeting. The main focus will be Thursday’s release of the delayed October and November personal income and consumption report which will also provide the latest readings on core PCE inflation. Though Oct and Nov data are stale data, we are tracking Dec Core PCE at .4% MoM. We also expect the final reading of Q3GDP to come stronger at 4.6% from the previous reading of 4.3%. We have 2nd tier macro data in US this week such as pending home sales, initial jobless claims & S&P PMIs. On dated supply, we have $13 BN of 20yr UST auction on Wednesday & $21 BN of 10 year TIPS. In tariff news, we expect EU parliament to announce a pause on the US EU trade deal by Wednesday. This matter will escalate further before it settles down. This issue is -ve for EUR, risk assets specially DM equities, +ve for Gold & Silver. On US rate view, we are bullish on UST long end yields since early Nov & are targetting 4.30% levels on the 10yr UST. There is too much uncertainty on the present inflation data and hence Fed might want to wait for a few more month’s data to get clarity & certainty on the inflation front. On the employment front, labor demand supply looks balanced & hence there is no pressing reason for the FOMC to ignore the uncertainty on inflation front. Hence, we continue to believe the Fed will likely keep policy rates on hold until a new Fed chair is sworn in. We continue to expect 2 cuts of 25 bps each in June & Sep after a new Fed Chair arrives by May. In the news flow on Iran, we still believe there might be a regime change soon in Iran initiated by Israel attacking key Iranian establishments and backed by US. Hence the geopolitical risk premium in crude can remain for some time in short term but eventually as the regime gets replaced by a US friendly regime, crude supply will further overtake demand leading to Brent prices falling to $50 levels by mid CY26. In RoW data, we have UK CPI, German ZEW, Canadian CPI & Chinese Q4GDP (expected weak at 4.5%).
