Trump, Seeking Economic Reset, Insists Smart People Back Tariffs

The independence of central banks is essential for monetary stability, Bank of Italy Governor Fabio Panetta said on Tuesday, amid a spat between the Italian government and the European Central Bank over the country's gold reserves.

The ECB urged Rome on Monday to reconsider a proposed amendment to its 2026 budget law that would state that the Bank of Italy's gold reserves belong to "the Italian people," warning the move could jeopardise the central bank's independence.

Without mentioning specifically the issue of the gold reserves, Panetta said in a speech that monetary stability rests on "the authority of the State and the credibility of an independent central bank."

Italian Economy Minister Giancarlo Giorgetti intends to send a letter to ECB head Christine Lagarde to clarify that Rome has no plans to undermine the independence of the Bank of Italy, sources familiar with the matter told Reuters on Tuesday.

RISKS AHEAD

In his speech in Dublin at an event organised by Ireland's central bank, Panetta said the transformation of the international monetary system, with accelerating digitalisation and growing multipolarity, carried a number of risks.

"When structural forces move inch by inch, while technology advances in leaps and bounds, the outcome is not just linear change or fresh opportunities; it may also turn turbulent," he said.

Panetta expressed concern about the increasing use of stablecoins in cross-border payments, saying their circulation was opaque and they suffered from operational vulnerabilities.

"During the transition to a digital monetary order, their growing use could add a layer of volatility – or even instability – to an already uncertain international environment," he said.

Managing these risks will require clear rules, credible public anchors and sustained international cooperation, Panetta added.

The Bank of Italy chief also noted "the weakening of some of the dollar's traditional pillars," while China's yuan and the euro both have the potential to become more global currencies but are not currently in a position to match the greenback.

"Multipolarity could increase diversification, spreading the burden of global liquidity provision and reducing global dependence on the US policy cycle. But it could also amplify volatility and contagion risks," he warned.

Source: Reuters

Canadian travel provider Transat AT Inc. reached a tentative agreement with the Air Line Pilots Association, preventing a disruptive strike one day before it could have started.

The Montreal-based company, which operates the airline Air Transat, said in a statement Tuesday on its website that operations would return to normal. The labor deal will be submitted to more than 750 pilots for a ratification vote in the coming days, after "more than 11 months of intensive negotiations," according to ALPA.

"Our pilots have been frustrated flying under a decade-old, outdated collective agreement," Bradley Small, chair of Air Transat's ALPA master executive council, said in a statement. "We believe this new agreement meets the needs of today's profession, consistent with collective agreements other ALPA-represented pilot groups are signing with their employers."

The parties did not share details of the arrangement. Air Transat had canceled some flights to wind down operations before the possible walkout. Canceled flights will not be reinstated, according to the airline's frequently asked questions page.

Source: Bloomberg Europe

EVERY December, Malaysia's university convocation halls are filled with celebration. Parents weep with pride as their children cross the stage, certificates in hand, proof of years of sacrifice and hope. Yet once the photographs are taken and the robes returned, a quieter anxiety sets in. For a growing number of graduates, the question is no longer simply where to work, but whether the economy they are entering can still deliver meaningful upward mobility.

To understand Malaysia's predicament, one must look beyond national borders. Malaysia does not compete in isolation. It is positioned in a demanding regional triangle defined by Singapore, Vietnam and South Korea—three economies with sharply different labour-market models. Together, they illuminate the uncomfortable middle ground that Malaysia now occupies.

Wages offer the first stark comparison. Malaysia's median monthly wage in the formal sector is around RM3,000. Nearly half of formal workers earn below this level, with the largest concentration clustered between RM1,500 and RM1,999. It is an income structure that sits uneasily with the rising cost of living in urban Malaysia and offers limited room for wealth accumulation among young professionals. Across the Causeway, Singapore's median monthly income exceeds S$5,700—several times Malaysia's level. In Korea, the median monthly wage approaches RM10,000. Vietnam, by contrast, remains far cheaper, with average earnings at roughly one-tenth of Singapore's level.

On wages alone, Malaysia is caught in the middle: no longer cheap enough to compete purely on labour cost, yet nowhere near wealthy enough to command the premium of a high-skill economy. But the more consequential story lies beneath the surface — in the type of jobs each economy is creating.

Singapore has spent two decades engineering a deliberate upward shift in job structure. Today, nearly two-thirds of employed residents are professionals, managers, executives and technicians. These high-skill jobs anchor the city-state's wage structure, support strong household incomes, and feed continuous reinvestment into innovation, finance, technology and advanced services. Even Singapore's challenges — inequality, work pressure, reliance on foreign talent — stem from the intensity of its high-productivity growth model, not from a failure to create skilled employment.

Vietnam offers the opposite contrast. Only a minority of its workforce has tertiary or formal vocational training, yet this very structure underpins its appeal as one of Asia's most competitive manufacturing hubs. Factory wages remain low but are rising steadily. Multinational firms relocate assembly lines, packaging operations and light manufacturing to Vietnam not because it is sophisticated, but because it is scalable, disciplined and cost-efficient. Vietnam is still playing the classic industrialising latecomer strategy — pulling millions into formal employment through labour-intensive manufacturing while slowly upgrading its skills base.

Korea represents a third model: already a high-income, technology-driven economy with world-class electronics, automotive and digital industries. Its labour market, however, is deeply dualistic. Permanent workers in large firms are well paid and highly protected; younger and irregular workers face insecurity and weaker wage progression. Youth unemployment remains persistently elevated, and elderly poverty is among the highest in the OECD (Organisation for Economic Co-operation and Development). Korea shows both the rewards and frictions of a fully industrialised, innovation-dependent economy.

Malaysia, uncomfortably, resembles none of these models fully.

More than half of Malaysia's workforce is concentrated in semi-skilled occupations. When new jobs are created, the pattern reinforces itself: roughly two-thirds of recent job creation has been semi-skilled, while the share of skilled jobs has fallen sharply — from about 45% in 2018 to just 27% in 2024. This is not the structure of a high-income labour market. At the same time, Malaysia produces graduates at near-advanced-economy scale — about 300,000 annually.

The result is structural graduate underemployment. An estimated two million Malaysians with tertiary qualifications are now working in jobs that do not match their education level. Official unemployment remains low, hovering around 3%, but this headline figure masks a deeper fragility. The real issue is no longer joblessness; it is the erosion of job quality and the weakening of education as a reliable pathway to income progression.

This structural imbalance explains Malaysia's wage stagnation. As graduates are absorbed into semi-skilled roles, downward wage competition intensifies in the middle of the labour market. Median wages become trapped near the RM3,000 mark even as GDP (gross domestic product) grows. Meanwhile, the upper tier of high-income professional jobs remains too thin to pull the overall wage structure upward. It is a labour market generating quantity without quality.

In regional terms, this leaves Malaysia squeezed from both sides. Vietnam is rapidly improving its industrial depth while retaining a decisive cost advantage. Singapore and Korea dominate at the high end of skills, technology, finance and innovation. Malaysia, by contrast, is drifting in the "missing middle" — too expensive to beat Vietnam on cost, yet insufficiently specialised to rival Singapore or Korea on skill.

The strategic risk is clear. Multinational firms seeking large-scale, cost-efficient production will favour Vietnam. Firms requiring frontier technology, deep research ecosystems and advanced services will gravitate towards Singapore and Korea. Malaysia is increasingly left with semi-skilled, mid-value activities that face both price pressure from below and technological pressure from above.

This is not a story of national failure. Each of these countries carries its own vulnerabilities. Singapore struggles with inequality and foreign-labour dependence. Vietnam must grapple with informality, weak social protection and limited high-skill capacity. Korea faces demographic decline, labour dualism and youth disillusionment. Yet all three have something Malaysia increasingly lacks: a coherent labour-market development thesis. Their outcomes, for better or worse, reflect deliberate strategic choices.

Malaysia's labour market, by contrast, reflects hesitation.

The nation has not fully committed to being a high-skill innovation hub, yet it has also moved decisively beyond being a low-cost manufacturing base. That hesitation is now visible in wages that no longer rise in line with productivity aspirations, in graduates struggling to find appropriate work, and in a middle class whose purchasing power grows ever more fragile.

This drift carries broader economic consequences. An economy dominated by semi-skilled jobs cannot sustain strong productivity growth. Domestic consumption remains constrained, fiscal capacity weakens, and the social contract between education and opportunity begins to fray. For young Malaysians burdened with education loans and urban living costs, delayed career progression translates into delayed marriage, delayed home ownership and intensified interest in migration.

Malaysia deserves credit for its achievements. Extreme poverty has been pushed close to zero. Unemployment remains low. Infrastructure is extensive, and the economy remains diversified. But the development challenge has evolved. The central question now is no longer survival, but direction. It is not whether Malaysia can create jobs, but whether it can create enough high-quality jobs to sustain a confident middle-income society.

The answer lies in a decisive recalibration of growth strategy. Malaysia must pivot from labour absorption to skill deepening, from volume-driven employment to productivity-led job creation. This requires far tighter alignment between university curricula, industrial policy, technology investment and private-sector hiring practices. It also requires confronting uncomfortable trade-offs: moving away from certain low-value labour-intensive activities even if they create short-term employment, in order to unlock higher-wage trajectories over time.

The regional context leaves little room for ambiguity. In a world of supply-chain fragmentation, friend-shoring and technological rivalry, countries are being sorted by what they can do best. Vietnam is becoming indispensable to cost-efficient manufacturing. Singapore and Korea are indispensable to high-skill innovation systems. Malaysia must now define its own indispensable role — or risk being permanently compressed between the two.

As Noor Azlan Ghazali, who heads the Malaysian Inclusive Development and Advancement Institute (Minda-UKM), has observed, the convocation photographs taken today will sit on family walls for decades. Whether they mark the beginning of true upward mobility or the start of quiet disappointment will depend on how Malaysia responds to this regional reality. In a neighbourhood shaped by Singapore, Vietnam and Korea, muddling through the middle is no longer a viable strategy.

Samirul Ariff Othman is an analyst of global politics, business and economics. He is an adjunct lecturer at Universiti Teknologi PETRONAS (UTP) and a senior consultant with Global Asia Consulting.

Source: Theedgemarkets

The Bank of Thailand, the country's central bank, is planning a new credit guarantee measure to help small and medium enterprises access loans more easily to help them recover from a liquidity crunch amid a weak economic outlook.

A persistent trade war, geopolitical tensions and other external negative factors have raised uncertainty in the Thai financial market, pushing credit risk higher and forcing commercial banks to tighten credit policy. This has become a structural problem, making it harder for Thai SMEs to be granted loans to boost their liquidity.

As a result, total bank amount in baht of loans in Thailand contracted for the fifth consecutive quarter in 2025, while amount of loans to SMEs fell for the 13th quarter in a row.

"That's why we need to help SMEs first as they play a key role in the Thai economy," Bank of Thailand governor Vitai Ratanakorn told Nikkei Asia in the sideline of a press event in Bangkok. "We are raising funds [to use as] credit guarantees for SMEs, to make it easier for commercial banks to extend loans to them."

SMEs generate total economic value that in 2022 was equivalent to around 35% of the country's gross domestic product and account for about 71% of total employment nationwide, according to the Thailand Development and Research Institute. Thailand's GDP in the July-September period grew 1.2% from a year earlier, hitting the lowest level since 2021, when the economy was still heavily affected by the COVID-19 pandemic.

According to the central bank's plan, it will set aside 100 billion baht ($3 billion) from the country's Financial Institutions Development Fund, which the Bank of Thailand collects from commercial banks at a rate of 0.23% of total deposits every year.

The fund will guarantee loans granted to SMEs by paying 20-30% to banks if there is a repayment default. Loans will be limited to 100 million baht per business.

"This guarantee could help cut credit risk and make commercial banks feel more confident about extending loans to SMEs," said Vitai, who took office in October.

He added that to be eligible for the guarantee, companies must be in targeted industries classified by the government as high-value and able to drive the digital economy, such as food processing, medical and wellness, robotics and bio-chemicals.

The central bank is working in collaboration with the Finance Ministry and the Thai Bankers' Association on the details of the project which is due to be implemented by early next year.

Vitai said the credit guarantee measure to SMEs should boost the economy within a few years.

Source: Asia_Nikkei

Eileen Higgins won Miami's mayoral runoff, beating a candidate backed by President Donald Trump while becoming the first woman ever and the first Democrat in nearly three decades to lead the city.

Higgins led Republican Emilio Gonzalez by more than 18 percentage points, with all precincts reporting. The Associated Press and election website Decision Desk both projected her as the winner.

"Tonight, the people of Miami made history," Higgins said in a statement on Tuesday evening. "Together, we turned the page on years of chaos and corruption and opened the door to a new era for our city."

The mayor's race drew outsized national attention, with political figures weighing into a race that's technically nonpartisan. Along with Trump, Florida Governor Ron DeSantis and Senator Rick Scott endorsed Gonzalez. Higgins received support from the Democratic National Committee and won the backing of former Transportation Secretary Pete Buttigieg.

Higgins' victory adds to a recent stretch of Democratic gains, including last month's wins in New Jersey and Virginia and Zohran Mamdani's victory as New York mayor — results widely seen as a warning sign for the GOP going into the 2026 midterms. While the city of Miami boasts a population of just 480,000 people, a Democratic win in a deeply red state offers the party another lift going to next year.

Higgins, a former Miami-Dade County commissioner, ran on promises to cut corruption and red tape at Miami city hall, while improving housing affordability and public transit.

Her pledge for more development and less cumbersome permitting processes won the support of Miami's real estate developers. She also racked up endorsements from labor unions, including for local police and firefighters.

The mayor-elect was born in Ohio, grew up in New Mexico and moved to Miami in the early 2000s. She has previously worked for the State Department in Mexico.

Higgins, who has an engineering degree and an MBA from Cornell University, is the first non-Hispanic to hold the job in nearly 30 years though she speaks fluent Spanish.

Higgins, 61, will succeed Francis Suarez, a Republican who used the part-time mayor position to boost his national profile, rub elbows with Miami's ultra wealthy, create inroads with the Saudi royal family and multiply his personal wealth while in office.

Higgins' rival Gonzalez had a long military career before pivoting to roles that included head of US Citizenship and Immigration Services, director of Miami International Airport and Miami city manager.

The Cuban-born Gonzalez pushed for the abolishing of property taxes as part of his campaign platform, echoing proposals by governor DeSantis.

The role is often described as more ceremonial given that the mayor doesn't have a vote on the city commission and far more power is concentrated with the mayor of Miami-Dade County, who oversees a $13 billion budget for a region of 2.8 million people.

Still, the win is a shot in the arm for Democrats in Miami, who have been losing their grip on South Florida — previously a Democratic stronghold that Trump won by 11 points last year. In Miami-Dade County, the number of registered Republicans surpassed Democrats earlier this year.

Trump has made South Florida central to his presidency and legacy — state officials recently gifted him a valuable piece of waterfront land in downtown Miami for his future presidential library, where the Trump family plans to build "an icon on the Miami skyline." He'll also host Group of 20 leaders next year at his golf club in west Miami.

Source: Bloomberg Europe

Key Points:

Japanese producer prices fueled speculation about a December Bank of Japan rate hike on Wednesday, December 10. Producer prices signaled sticky consumer price inflation midway through the fourth quarter. USD/JPY dropped in response to the uptick in producer prices, partially reversing the previous day's 0.63% loss on the hot US JOLTs Job Openings report.

While the November figures bolstered bets about a December BoJ rate hike, traders faced a higher degree of uncertainty on the Fed's monetary policy outlook. Market bets on a December Fed rate cut remained firm despite solid overnight US jobs data.

However, the absence of October inflation and labor market data, canceled because of the US government shutdown, has left the Fed flying blind on crucial reports needed to make an informed interest rate decision and offer meaningful economic projections.

Given these dynamics and USD/JPY's return to 156, the short-term outlook looks cautiously bullish, while the medium-term outlook remains bearish, hinged on the Fed cutting and the BoJ raising rates.

Below, I'll discuss the macro backdrop, the near-term price catalysts, and technical levels traders should closely watch.

Japanese Producer Prices Give BoJ Hawks a Strong Footing

Producer prices increased 2.7% year-on-year in November, mirroring October's trend, lifting demand for the Japanese yen. November's producer prices indicated rising import prices, forcing producers to pass higher costs on to consumers. Higher prices may also signal stronger demand, enabling producers to raise prices and fuel demand-driven inflation.

The BoJ has raised previously concerns about the weaker yen pushing import prices higher, adversely affecting household purchasing power. Rising producer prices will give the BoJ hawks a stronger argument to raise interest rates on December 19.

USD/JPY responded, briefly falling from 156.840 to 156.795 after the data.

USDJPY – One Minute Chart – 101225

The November data followed BoJ Governor Kazuo Ueda's optimistic economic outlook. He stated that the economy will return to growth in the fourth quarter and beyond, reinforcing his recent bullish pivot. Last week, Governor Ueda supported a rate hike, citing strong wage growth, fading US tariff risks, and FX weakness.

While expectations of a BoJ rate hike are strengthening yen demand, the FOMC interest rate decision, FOMC Economic Projections, and Fed Chair Powell's press conference will dictate buyer appetite for the US dollar.

FOMC Interest Rate Decision Looms

Later on Wednesday, the Fed will take center stage as investors await its highly anticipated interest rate decision and Economic Projections. Economists expect the Fed to lower interest rates by 25 basis points, with the CME FedWatch Tool giving an 87.6% chance of a rate cut.

Barring an unexpected hold or a surprise 50-basis-point cut, the market focus will be on the Economic Projections and the dot plot on rate expectations. Notably, the chances of a Q1 2026 rate cut declined overnight.

The FOMC Committee has divided into two camps in recent months. On one side, members support further policy easing to bolster a cooling labor market, while on the other, voters view sticky inflation as a reason to pause further cuts. Given the division among voting members, a hawkish cut looks likely, where the Fed downplays further easing in the near-term, but remains data dependent.

Economic Projections and Dot Plot to Spotlight the Greenback

The Economic Projections and dot plot will provide the crucial insights into the Fed's outlook and potential rate path. For context, the September dot plot projected a 3.25%-3.50% Fed Funds Rate (FFR) by the end of 2026.

A 25-basis-point rate cut today would leave two further rate cuts to align with the September dot plot, the baseline for traders. A dovish Fed rate cut would be a lower FFR by the end of 2026, while a hawkish cut would be a higher 2026 FFR forecast.

Notably, the projections will be based on outdated inflation and jobs data, given the cancellation of October data. The absence of October's government reports may downplay the influence of inflation, unemployment, and GDP projections on US dollar demand. However, given the USD/JPY sensitivity to September's JOLTs job openings, the pair will be exposed to heightened volatility.

Meanwhile, there is also a potential announcement on bond purchases (quantitative easing).

With increased uncertainty about the post-December Fed rate path, the short- and medium-term outlook hinges on the Fed and the BoJ's interest rate decisions and policy outlooks. Despite the uncertainty, the Fed's easing and the BoJ's tightening support a bearish medium-term outlook for USD/JPY.

Technical Outlook: USD/JPY on a Downward Trajectory

Looking at the daily chart, USD/JPY traded above the 50-day and 200-day Exponential Moving Averages (EMAs), signaling a bullish bias. However, fundamentals have begun to shift from the technical trend, supporting a bearish medium-term outlook.

A break below the 155 support level would bring the 50-day EMA into play. If breached, the 153 support level would be the next key support. Significantly, a sustained fall below the 50-day EMA would signal a bearish trend reversal, supporting a near-term drop toward 150.

USDJPY – Daily Chart – 101225

Position and Upside Risk

In my view, a narrow US-Japan rate differential supports a bearish medium-term outlook. A sustained USD/JPY drop below the 50-day EMA would signal a fall toward the 200-day EMA. Breaching the 200-day EMA would affirm a bearish trend reversal.

However, upside risks could derail the bearish momentum. These risks include:

Nevertheless, yen intervention warnings are likely to cap the upside around the November 20 high of 157.893, based on past communication.

Read the full USD/JPY forecast, including chart setups and trade ideas.

Conclusion: Longer-Term Fall to 140 Hinges on the Dot Plot

In summary, the BoJ's support for a December rate hike leaves the Fed in the driving seat. A dovish Fed rate cut, projecting two to three policy adjustments in 2026, and QE would align with the bearish medium-term outlook for USD/JPY. Furthermore, a dovish Fed rate cut could pave the way toward 130 over the 6-12 month time horizon.

Source: FX Empire