RBA Holds Cash Rate At 3.6%, Focused On Upside

Westpac

Forex

Economic

Central Bank

Summary:

The RBA kept the cash rate on hold as expected. The Board was slightly more hawkish but Governor Bullock was firmly focused on the upside risks to inflation.

The RBA kept the cash rate on hold as expected. The Board was slightly more hawkish but Governor Bullock was firmly focused on the upside risks to inflation. We are less convinced that capacity constraints will be an issue for inflation, which could bring back the debate for rate cuts.

· As widely expected, the RBA kept the cash rate on hold at 3.6% in a unanimous decision. The statement struck a slightly more hawkish note but in the following media conference Governor Michele Bullock was focused on the upside risks to inflation.

· Following the media conference, the probability of a rate hike has risen. But we see this to be dependent on data over the coming months and a more likely scenario is a prolonged pause.

· Rate cuts could still be brought back to the table if our view that supply will not be a constraint and the economy can grow faster without triggering inflation is realised.

· As such, our current baseline is for two 25bp rate cuts but not until mid-2026. This would bring the cash rate to 3.1% –125bp below its peak this monetary policy cycle.

Today's decision by the RBA to leave the cash rate unchanged at 3.6% was widely anticipated by the market and economists. It was a unanimous decision. The statement struck a slightly more hawkish note but in the following media conference, Governor Bullock indicated that the Board was focused on the upside risks to inflation.

She confirmed that at today's meeting "a rate cut was not on the table", adding that supply and demand conditions are a little tight. The potential necessary conditions for a rate hike in 2026 were also discussed as the Board believe the balance of risks for inflation have tilted to the upside.

While the Board acknowledged that some of the recent increase in underlying inflation was due to temporary factors, they still saw some signs of a broader pick-up. They also remain concerned over labour market tightness and strong growth in broader measures of wages and high unit labour costs.

They will continue to monitor these factors against a backdrop of what they believe to be a stronger pick up in private demand that could lead to capacity pressures.

But as our Chief Economist Luci Ellis recently noted in "Swing up, you won't hit a wall", the view that stronger private demand will quickly collide with supply constraints is misplaced. Indeed, we think the RBA and some other economists' projection of trend growth of 2% is too conservative. We see 2¼% or higher as realistic given population, participation, and potential productivity gains.

There is no denying that overall productivity has been very weak. But as we have previously highlighted, this in part reflects the rapid increase in the share of the care economy over recent years, which is very labour intensive and mechanically less productive than the market sector. But as private demand and the market sector become an increasing driver of economic growth, this will support an improvement in headline productivity measures. This is not just a shift in the composition of the economy. The recovery in business investment, as seen in the Q3 National Accounts, and the solid lift in private business capex intentions will see the share of business investment lift from its historical lows. With more capital per worker, we will see stronger productivity. Then there is the technological innovation and adoption, including an eventual lift from AI.

It is also worth noting that the economy is not booming. Real disposable income per person has only just returned to 2020 levels, the stimulatory impact of Stage 3 tax cuts are rolling off and with rates on hold for longer, the boost from earlier rate cuts will also fade.

Overall, we do not expect the economy to hit a hard capacity wall any time soon. If this view proves correct, the economy can grow faster without triggering further inflation, reducing the need for slightly restrictive policy.

Indeed, we expect core inflation to ease back toward, and eventually below, the mid-point of the target band by the end of 2026. Much of the recent increase reflects higher administrative prices, seasonal volatility and the removal of cost-of-living assistance. These are unlikely to be repeated to the same extent. Further out, as productivity improves and wage inflation moderates this will also support lower core inflation.

As such, our current baseline is for two more 25bp rate cuts but not until mid-2026. This would bring the policy rate to 3.1% – 125bp below its peak this monetary cycle.

Still, following Governor Bullock's comments in today's press conference, the probability of a rate hike has risen. This would be dependent on persistence of the current reacceleration in inflation. Instead, we see the risks as being more tilted to a prolonged pause. The evolution of the data over the coming months will see the RBA reassess the sustainability of inflation moving back to target and the restrictiveness of current policy settings.

Source: Westpac Banking Corporation

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Gerik

Political

Russia-Ukraine Conflict

Europe Pushes Ahead on Asset-Based Support for Ukraine

Following high-level talks in London, European leaders have expressed growing confidence that a deal can be struck by year-end to use immobilized Russian central bank assets in support of Ukraine. UK Prime Minister Keir Starmer's office confirmed that "positive progress" was made on plans to back a €90 billion ($105 billion) loan aimed at funding Ukraine’s reconstruction, even as internal EU resistance particularly from Belgium, where a significant portion of the assets are held has slowed progress.

Finnish Foreign Minister Elina Valtonen told Bloomberg that a legally and politically sustainable framework is close, emphasizing that using Russian state assets to support Ukraine is not only justified but necessary. A final decision is expected at the EU leaders’ summit in Brussels on December 18.

US Stalls on Security Guarantees as Europe Seeks Unity

While Europe moves toward a financial solution, deepening strategic divergence with the United States has become apparent. The Trump administration has largely paused direct aid to Ukraine, instead floating a 28-point peace plan that, according to officials in Kyiv and Brussels, initially leaned too far in Russia’s favor. Though the framework has since been revised to a 20-point version, the updated plan still lacks clear consensus, especially on key issues like NATO membership and territorial integrity.

Ukrainian President Volodymyr Zelenskiy stated that the most sensitive components control over Donetsk and Luhansk and binding U.S. security guarantees remain unresolved. He emphasized that a ceasefire must align with the current front line and rejected any proposal requiring Ukrainian troop withdrawal from contested regions. The US, meanwhile, has proposed turning parts of Donbas into a demilitarized zone, which Kyiv and its European backers view as an unacceptable concession to Moscow.

Zelenskiy Navigates Diplomatic Tightrope Amid US-Russia Peace Talks

The London summit, attended by leaders from the UK, France, Germany, and representatives from other NATO and EU member states, was followed by broader coordination calls with senior figures from Italy, Poland, the Netherlands, Sweden, and Turkey. These discussions underscored Europe’s growing concern that the US-led negotiations are sidelining allies and veering toward a settlement that lacks enforceable protections for Ukraine.

Trump’s appointment of his envoy Steve Witkoff and son-in-law Jared Kushner to help broker the deal has added to European skepticism. In contrast, Ukraine continues diplomatic outreach, with Zelenskiy shuttling between Brussels and Rome, and indicating a willingness to meet Trump in person if substantive progress can be achieved.

Trump, speaking to reporters, criticized Zelenskiy for not reviewing the latest proposal and claimed that Russia was “fine with it.” His administration's latest national security strategy reflects a diminished appetite for prolonged engagement, asserting that Europe harbors "unrealistic expectations" for the war.

Geopolitical Implications and the Path Ahead

The proposal to repurpose frozen Russian assets has gained traction partly due to the financial vacuum left by declining US support. The EU estimates Ukraine will require at least €135 billion over the next two years to maintain core government functions and military resilience. As such, the asset-based loan model could become the backbone of Western support moving forward.

However, the legality of diverting frozen sovereign assets remains contested within international financial frameworks, and member states like Belgium have raised concerns about setting a precedent that could weaken future central bank protections globally. Still, the moral and political argument for such a move has gained ground as the war drags on and reconstruction needs mount.

Europe Advances While Transatlantic Unity Falters

As negotiations around Ukraine's future intensify, Europe is proactively seeking financial and political solutions to support Kyiv, including repurposing Russian state assets and aligning on long-term reconstruction. In contrast, the United States under Trump’s recalibrated foreign policy appears more focused on ending the war quickly, even at the risk of undermining Ukraine’s sovereignty.

With time running out before key summits and decisions, the outcome of these parallel efforts will shape the future of European security, postwar reconstruction, and the balance of power between democratic alliances and autocratic regimes. Whether Kyiv secures both the funding and the guarantees it needs depends on how aligned or fractured its Western allies remain in the crucial weeks ahead.

Source: Reuters

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Justin

Forex

Commodity

The EURUSD pair has risen to 1.1648. All eyes are on the Federal Reserve's December meeting.

EURUSD forecast: key trading points

· Market focus: delayed US labour market data is in the spotlight

· Current trend: the EURUSD pair is rising ahead of the Fed's decision

· EURUSD forecast for 9 December 2025: 1.1682

Fundamental analysis

The EURUSD rate is edging higher on Tuesday, reaching 1.1648. However, overall, the major currency pair continues to move sideways ahead of the two-day Federal Reserve meeting, where the market is nearly unanimous in expecting a rate cut.

The likelihood of a 25-basis-point rate reduction on Wednesday is estimated at about 87%, up from around 67% a month ago. Still, the outlook for 2026 remains uncertain. A hawkish cut is possible, in which Jerome Powell signals caution regarding further easing steps.

Investors are also awaiting key US macroeconomic releases. Today, the postponed JOLTS job openings report for October will be published, followed by initial jobless claims and the trade balance later in the week.

The EURUSD forecast is favourable.

EURUSD technical analysis

On the H4 chart, the EURUSD pair maintains a moderately bullish trajectory, but upward momentum has noticeably weakened. The price is consolidating below the 1.1682 resistance level, which has repeatedly capped attempts at growth. Quotes are currently moving along the middle Bollinger Band, indicating the absence of a strong trend. The upper band is slightly turning downwards, reflecting lower volatility.

The Stochastic Oscillator is in the mid-range around 45, giving no clear signals. The market is out of oversold territory but lacks a confident bullish trigger. MACD remains positive, yet its histogram is declining, underscoring weakening bullish momentum and a likely phase of sideways consolidation.

The nearest support level is located at 1.1547 – the level from which the previous strong recovery began. The resistance stands at 1.1682. A breakout above this level would open the path towards 1.1750. As long as the pair trades between these boundaries, the baseline scenario is consolidation within the range with a mild upward tilt.

Summary

The EURUSD pair is rising slightly, but very cautiously. The EURUSD forecast for today, 9 December 2025, suggests a mild upward move towards 1.1682.

EURUSD 2026-2027 forecast: key market trends and future predictions

This article provides the EURUSD forecast for 2026 and 2027 and highlights the main factors determining the direction of the pair's movements. We will apply technical analysis, take into account the opinions of leading experts, large banks, and financial institutions, and study AI-based forecasts. This comprehensive insight into EURUSD predictions should help investors and traders make informed decisions.

Gold (XAUUSD) forecast 2026 and beyond: expert insights, price predictions, and analysis

Dive deep into the Gold (XAUUSD) price outlook for 2026 and beyond, combining technical analysis, expert forecasts, and key macroeconomic factors. It explains the drivers behind gold's recent surge, explores potential scenarios including a move toward 4,500 to 5,000 USD per ounce, and highlights why the metal remains a strong hedge during global uncertainty.

Source: RoboForex

Risk Warnings and Disclaimers

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Winkelmann

Economic

Stocks

British American Tobacco on Tuesday reaffirmed its 2026 growth targets but said performance will likely come in at the lower end of its 3% to 5% revenue growth range, as the London-based tobacco company navigates a transition to nicotine alternatives amid regional headwinds.

The company expects approximately 2% revenue and adjusted profit growth for fiscal year 2025, with New Category products, encompassing heated tobacco, vapor and nicotine pouches, accelerating to double-digit growth in the second half.

Chief executive Tadeu Marroco said the company remains "focused on establishing glo Hilo as a premium offering in the largest Heated Products profit pools" with launches in Japan in September and Poland in October, with additional rollouts planned for 2026.

BAT's U.S. operations showed the strongest momentum, with value share rising 20 basis points while volume share remained flat.

The company's Velo Plus nicotine pouch drove Modern Oral volume share up 920 basis points in the U.S. market, where BAT said it is on track for full-year profitability in its New Category business.

The Velo brand achieved 15.9% volume share of Total Oral products and 31.8% of Modern Oral products globally, representing increases of 460 basis points and 590 basis points respectively.

BAT's Vuse vapor brand, which maintained global leadership in tracked channels with value share in top markets up 10 basis points, showed improved second-half performance despite ongoing challenges from illicit products.

The company expects full-year Vuse revenue to decline in the high-single digits, compared to a 13% drop in the first half.

Regional performance varied significantly. The Americas excluding the U.S., led by Brazil, Turkey and Mexico, delivered strong results. However, the Asia-Pacific, Middle East and Africa region faced material fiscal and regulatory headwinds in Bangladesh and Pakistan that will impact adjusted profit growth.

The company's glo heated tobacco product line saw volume share in top markets decline 1.2 percentage points, impacted by competition in Japan.

BAT's Americas excluding U.S. volume share for glo declined 60 basis points as the company made resource allocation decisions ahead of the glo Hilo rollout.

Globally, BAT's group value share in top cigarette markets remained flat while volume share declined 10 basis points. The company projects global tobacco industry volume will decline approximately 2% for 2025.

BAT announced £1.3 billion in share buybacks for fiscal year 2026, up from £1.1 billion in 2025. The company expects operating cash flow conversion to exceed 95% in 2025, with gross capital expenditure of approximately £1.2 billion.

For fiscal year 2025, BAT projects mid-single digit New Category revenue growth at constant rates, with approximately 2% adjusted profit from operations growth at constant rates.

The company anticipates a roughly 3% translational foreign exchange headwind on adjusted profit from operations and approximately 4% on adjusted earnings per share. Net finance costs are projected at approximately £1.8 billion.

Source: Investing

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Danske Bank

Stocks

Forex

Economic

In focus today

In the US, the delayed September JOLTs report is finally due for release in the afternoon. The number of job openings is a key measure of labour demand for the Fed, and the release will gather extra attention in light of the FOMC rate decision tomorrow. NFIB's small business optimism index for November and ADP's weekly private sector employment estimate will also be released today.

In Denmark, we expect foreign trade data and the current account for October. It will be interesting as exports remain the key driver of growth in Denmark.

In China, overnight, we will see CPI for November, which is expected to move more into positive territory (cons: 0.7% y/y, prior: 0.2% y/y). Core inflation has moved higher over the past six months as well. China still suffers from deflationary pressures in the producer prices, though, and PPI is expected to stay around -2.0% y/y in November.

Economic and market news

What happened overnight

In Australia, the Reserve Bank held its cash rate at 3.60%, citing upside inflation risks and recovering demand. Governor Michele Bullock noted the board is considering the likelihood of rate hikes in 2026 and has not ruled out an increase as soon as its next meeting in February. The move resulted in higher yields and a slightly stronger AUD.

What happened yesterday

In the US, President Trump announced that Nvidia's H200 chips will be allowed for export to China, with Nvidia required to pay a 25% fee on sales, up from the initial 15%. Trump claimed that President Xi reacted positively to the decision, despite China expressing scepticism about such a deal last week. The decision has faced criticism from US lawmakers, who raised concerns over national security and the risk of the chips being used for military purposes in China.

In the euro area, the December Sentix indicator came in slightly better than expected at -6.2 (cons: -7.0, prior: -7.4), indicating investors have gotten less pessimistic about the economic recovery. Given how Sentix is the first sentiment indicator for December, the rise could signal improvements in other sentiment indicators to be released this month.

In Germany, industrial production increased by 1.8% m/m in October, significantly exceeding expectations and marking the second consecutive monthly rise. Growth was driven by construction and manufacturing, while the automotive sector detracted. Despite this sign of short-term stabilisation, soft indicators remain cautious. The Ifo Index fell in November as weaker expectations outweighed a slight improvement in the current assessment, and the Manufacturing PMI dropped to 48.2, its sharpest contraction since February. This highlights that while production shows improvement, weak demand and sentiment suggest recovery remains dependent on the impact of fiscal easing measures.

Equities: Equities had a slow start to the week and generally ended somewhat lower. The S&P 500 closed down 0.4% and the Stoxx 600 slipped 0.1%. Interestingly, the selling was again concentrated in defensives, similar to Friday. Hence, it was a slow day but not risk off emerging. Futures are little changed this morning.

One standout style yesterday was momentum, which has regained traction both on the day and over the past two weeks. One driver is the ongoing TPU-vs-GPU battle between Alphabet and Nvidia, which appears to have stalled. Alphabet fell 2% yesterday, while Nvidia and Microsoft both gained around 2%. After the close, the Trump administration announced that some of Nvidia's chip exports (H200 AI chips) to China may resume, which might have contributed to the rotation.

Another notable sector is health care: A top performer over the past three months—up roughly 8% in global terms. However, it has also been the sector investors have found financing in during the recent rebound, falling about 3% the last two weeks. This contributes to the divergence between defensives and cyclicals, both in risk-off and risk-on phases. Strong recent performance has narrowed global health care's valuation discount to global equities from 20% earlier this year to about 9% today. That is still one standard deviation below the 10-year average of 0%, and so we continue to recommend an overweight in this sector but admit that the upside has declined.

FI and FX: Yields are grinding higher despite the expectations of a Fed rate cut on Wednesday. Markets are seemingly getting a bit worried that the cut will be delivered with a more hawkish communication, and risk sentiment has also been dented with small declines in US and Asian equity indices overnight. EUR/USD declined towards 1.1620 yesterday afternoon as US yields temporarily spiked around 16.00 CET. With yields subsequently moving lower, EUR/USD settled around 1.1640-1.1650. The RBA kept the policy rate on hold at 3.60% as widely expected and signaled that risks from here are on the upside, resulting in a bearish steepening of the curve with the 2y point rising 9bp and the 10y rising 5bp, along with a stronger AUD.

Source: Danske Bank

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Samantha Luan

Economic

Political

Turkey arrested two players from its top football division and a former Super League club chairman as an illegal betting investigation widened to include executives and athletes, escalating a scandal that has already ensnared referees.

20 of 39 suspects were formally arrested, state-run Anadolu Agency reported. They include Galatasaray defender Metehan Baltaci, Fenerbahce midfielder Mert Hakan Yandas and Murat Sancak, the former chairman of Adana Demirspor — the club where Italian striker Mario Balotelli played in the 2021–22 and 2023–24 seasons.

Both players and Sancak denied the allegations during their testimony, local media reported. Galatasaray and Fenerbahce have not yet issued public statements.

Prosecutors sought the formal arrests of Yandas and Baltaci on match-fixing charges, according to Anadolu. Baltaci was first accused of betting on his own team, while Yandas allegedly placed bets through intermediaries on betting platforms. Sancak was detained after suspicious financial transactions were identified in his accounts.

The Turkish Football Federation said in October that its internal probe had uncovered hundreds of referees engaged in betting. The Federation's Disciplinary Board temporarily suspended more than 100 referees and players, covering both lower and top-tier leagues.

Istanbul prosecutors followed with detention warrants targeting match officials alleged to have wagered on games. Istanbul Chief Prosecutor Akin Gurlek signaled the investigation could expand to club presidents.

Source: Bloomberg Europe

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Gerik

Economic

Cryptocurrency

Bitcoin’s 2025 Rally Stalls as Market Volatility Returns

After a promising start driven by the re-election of crypto-friendly President Donald Trump, Bitcoin’s 2025 trajectory has become increasingly unstable. While early optimism pushed the asset to an all-time high above $126,000 in October, the subsequent announcement of tariffs and looming export controls sent shockwaves through both crypto and equity markets. The result was a rapid liquidation of over $19 billion in leveraged crypto positions the largest in history.

Bitcoin is currently trading near $89,000, down sharply from its peak and struggling to recover amid risk-off investor sentiment. Analysts note that the cryptocurrency is now at risk of ending the year lower, a reversal from bullish projections made earlier in 2025 by firms like MicroStrategy and Standard Chartered, both of which previously forecast highs of $150,000 to $200,000 by year-end.

Correlation with Equities Grows Stronger in 2025

One of the defining features of this year’s crypto market has been Bitcoin’s increasing correlation with equity markets, particularly the S&P 500 and NASDAQ 100. Traditionally viewed as a non-correlated or even counter-cyclical asset, Bitcoin now appears to mirror broader risk asset behavior.

According to LSEG data, the average correlation between Bitcoin and the S&P 500 rose to 0.50 in 2025, up from 0.29 in 2024. A similar pattern was seen with the NASDAQ 100, with correlation rising from 0.23 to 0.52. This reflects a deeper integration of crypto into traditional financial markets, driven by the entrance of retail and institutional investors seeking high-growth, high-risk opportunities.

AI stocks, in particular, have exerted a noticeable influence on crypto price movements. As AI-related equities saw their valuations questioned, Bitcoin and other digital assets also declined, suggesting that both markets now share a common sensitivity to investor risk appetite and speculative cycles.

Interest Rates and Fed Policy Add to Uncertainty

Alongside its equity-like behavior, Bitcoin has become increasingly reactive to changes in interest rate expectations. While historical data offers little clarity on Bitcoin’s performance during rate cut cycles, recent market dynamics suggest that dovish signals from the Federal Reserve are interpreted as bullish for crypto.

Following hawkish Fed messaging in October, Bitcoin saw renewed weakness. But with markets now pricing in an 86% chance of a 25-basis-point rate cut at the Fed’s December meeting, crypto markets are cautiously optimistic. Traders have slightly reduced their bearish bets, with the probability of Bitcoin ending the year below $80,000 falling from 20% to 15% in recent weeks.

Nevertheless, investors remain skeptical about any immediate return to bullish momentum. Phong Le, CEO of MicroStrategy (now referred to as “Strategy”), recently warned of a potential “Bitcoin winter,” even as the company maintains a large exposure. Founder Michael Saylor, however, insisted the company could withstand a 95% drawdown in Bitcoin’s price.

From Independence to Interdependence: Bitcoin’s Shifting Narrative

Bitcoin’s journey in 2025 underscores a significant evolution in how it is perceived by the market. Once hailed as a decentralized, inflation-resistant store of value, the asset now behaves increasingly like a high-beta tech stock heavily influenced by macroeconomic conditions, central bank policy, and investor speculation in adjacent sectors like AI.

This shift has both strategic and narrative implications for the crypto sector. While increased institutional adoption brings credibility and capital, it also subjects crypto to the same systemic pressures and herd behavior that govern traditional financial markets. As a result, Bitcoin’s diversification utility may be diminishing at the very moment it gains broader acceptance.

Bitcoin’s performance in 2025 has mirrored the volatility of global markets, shaped by trade policy shocks, interest rate uncertainty, and the speculative boom in AI. While the asset achieved historic highs earlier in the year, a combination of macro headwinds and evolving correlations with equities may force it to close the year with a rare annual loss. Whether Bitcoin reclaims its role as a unique alternative asset or remains bound to broader market sentiment will be a defining question as the world enters the next cycle of monetary and technological transformation.