On December 9, Germany's benchmark borrowing costs rose to their highest level since March after a senior European Central Bank (ECB) executive board member stated she found it "acceptable" that investors were betting on the next rate move being a hike. In a recent interview, the official expressed satisfaction with market expectations of another ECB rate increase. Isabel Schnabel, representing the ECB's executive board, became the first member to firmly signal in hawkish terms that the central bank's benchmark rate had bottomed out after a cumulative 2-percentage-point reduction in this easing cycle. Shortly afterward, money markets fully reinforced the view that the ECB's easing cycle had ended, with traders now pricing in just 3 basis points of additional cuts by mid-2025—far below last week's expectation of 10 basis points.
Meanwhile, Germany's October industrial output rose 1.8% month-on-month, significantly surpassing market expectations of a 0.4% decline and accelerating from September's downwardly revised 1.1% growth. This marked the strongest monthly increase since March. The expansion was primarily driven by a 3.9% surge in data processing equipment, electronics, and optical products output, along with a 2.8% rise in mechanical engineering production. In contrast, automotive sector output fell 1.3%, acting as a drag. Excluding energy and construction, industrial output grew 1.5%, with capital goods and consumer goods both increasing 2.1%, while intermediate goods edged up 0.6%. Energy output rose 1.4%, and construction output jumped 3.3%.
Key data to watch today includes Germany's seasonally adjusted export figures for October and the U.S. JOLTs job openings for the same month. Additionally, the Reserve Bank of Australia's midday rate decision warrants close attention.
**Dollar Index** The dollar index edged higher yesterday, closing slightly up amid choppy trading near 99.00. Short-covering and expectations of a potentially hawkish signal from the Fed's upcoming rate decision provided support. A New York Fed survey showing stable U.S. consumer inflation expectations in November also bolstered the currency. Resistance is seen around 99.50, with support near 98.50.
**EUR/USD** The euro dipped slightly yesterday, consolidating near 1.1650. The dollar's rebound on short-covering and Fed hawkish expectations weighed on the pair, though upbeat Eurozone data and optimistic ECB commentary limited losses. Resistance lies around 1.1750, with support at 1.1550.
**GBP/USD** Sterling retreated modestly to 1.3330, pressured by profit-taking and the dollar's strength. Lingering expectations of Bank of England rate cuts added downward pressure. Resistance is eyed near 1.3400, with support around 1.3250.
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