The final Fed countdown

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A Reuters Open Interest newsletter

What matters in U.S. and global markets today

By Yoruk Bahceli, markets correspondent

What matters in U.S. and global markets today

The Federal Reserve meeting is fast approaching on Wednesday – and the stakes are high. Rising bets for a December cut seem to have saved equities from AI jitters for now. But the effect on the dollar, which dipped further on Monday, has been more pain.

I'll get into all the market news below.

But first check out Mike Dolan's latest column where he discusses what is at the heart of the problem facing the Federal Reserve this week and throughout 2026.

And listen to the latest episode of the new Morning Bid daily podcast. Subscribe to hear Mike and other Reuters journalists discuss the biggest news in markets and finance seven days a week.

Data refreshes every time you open this email. For more U.S. market news, click here. Please send any feedback to morningbid@thomsonreuters.com.

Today's Market Minute

China's exports topped forecasts in November, driven by a surge in shipments to non-U.S. markets as manufacturers deepen trade ties with the rest of the world in light of President Donald Trump's prohibitively high tariffs.
A wave of flight cancellations by IndiGo, India's largest airline, sparked a week of chaos and grounded tens of thousands of passengers, laying bare the risks of having a duopoly-like situation in the world's fastest-growing aviation market.
U.S. lawmakers on Sunday unveiled an annual defense policy bill authorizing a record $901 billion in national security spending next year, billions more than President Donald Trump's request, and provides $400 million in military assistance to Ukraine.
China's imports of major commodities were on divergent tracks in November, with crude oil and iron ore powering ahead but copper and coal losing steam. The contrasting outcomes make it difficult to come up with a single narrative for demand in the world's biggest buyer of natural resources, writes ROI Commodities and Energy Columnist Clyde Russell.
The G7's proposed plan to bar tankers from hauling Russian oil ups the ante in the West's economic stand-off with Moscow, but the ultimate bite hinges on whether governments will ratchet up punishments on those skirting sanctions, argues ROI Energy Columnist Ron Bousso

The final Fed countdown

No surprise: It's all about the Fed this week, with traders pretty confident -- and hopeful -- the bank will deliver a 25 basis-point rate cut on Wednesday.

After all, bets that the Fed will cut rates have helped the S&P 500 bounce back from AI woes and jump 5% since late November, so equity traders need Jerome Powell and co to deliver.

As for the dollar, the market verdict is more pain.

The greenback was down a touch in early London trade on Monday, after two straight weeks of losses which has seen it drop more than 1% against peers, having hit its highest since late May before Fed bets gained traction.

A pause rather than a cut would come as a shock to markets. So the real focus will be on how many policymakers, who are looking increasingly divided, dissent from the decision. The Fed's decision-making committee has not had three or more dissents at a meeting since 2019 and even before that it was a rarity, happening just nine times since 1990.

This week is not all about the Fed though, with central banks in Canada, Switzerland and Australia also meeting, though they're all expected to hold rates.

But the focus was also on the European Central Bank on Monday, where Isabel Schnabel, a leading policy hawk, said Frankfurt's next move could be a rate hike rather than a cut as some expect, though it won't happen in the near future.

Markets are now pricing a small probability of an ECB hike next year -- one they had priced out previously. Traders already expect rate hikes in Japan, Australia and Canada, moves that could put further pressure on the dollar if they materialise.

It was no surprise then that the U.S. dollar dropped more than 1% against its Canadian peer on Friday, when Canada's unemployment rate once again defied expectations and fell to a 16-month low.

In bond markets, Germany's 30-year bond yield rose to its highest level since 2011, in the latest sign that long-end debt pressures are building back up. Japanese bond yields rose to fresh multi-year highs while U.S. 30-year Treasury yields touched their highest since September.

In geopolitics, the focus remains on Ukraine peace talks, where progress has been slow, with President Volodymyr Zelenskiy set to meet European leaders in London.

Today's key chart

Graphics are produced by Reuters.

Rising hopes for Federal Reserve easing have hit the U.S. dollar while boosting U.S. stocks, as would be expected. A 25 bps rate cut is essentially priced in for this week, though the outlook for 2026 is far from clear.

Today's events to watch

U.S. earnings: Toll Brothers, Phreesia, Oil-Dri Corporation of America, Ooma, Star Group LP, Compass Minerals International, Mama's Creations
U.S. bills, three-year note auction

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