The European Commission has raised its 2024 growth forecast for the eurozone to 1.3% from 0.9%, though it slightly lowered its 2026 outlook to 1.2%. Despite this, stronger-than-expected growth in the first three quarters, supported by rising consumer spending and investment, suggests continuing momentum. Inflation is projected to ease to 1.9% by 2026, while unemployment is expected to drop to 6.2%. Risks remain, including market volatility—especially in the US tech sector—domestic political uncertainty, and climate-related events. Meanwhile, China and Germany have agreed to deepen financial cooperation, enhancing yuan internationalization through measures like promoting offshore yuan markets and allowing RMB bonds as collateral. This could boost demand for the yuan and possibly support the euro through increased investment flows. Upcoming eurozone data releases include PMI figures and consumer confidence indicators later this week.

The yen has slightly rebounded after Japan’s finance minister cautioned against excessive currency volatility, but persistent concerns over PM Takaichi’s proposed fiscal stimulus and Japan’s widening interest rate gap with the U.S. continue to weigh on it. Despite a shrinking Bank of Japan balance sheet and signals of potential rate hikes as early as December or January, markets see limited follow-through and expect yen weakness to persist unless the U.S. Federal Reserve cuts rates more aggressively. Tensions with China and weak economic data—such as an unexpected GDP contraction—add to downside risks, though upcoming inflation and trade data, along with a key meeting between PM Takaichi and BOJ Governor Ueda, may offer fresh direction.

China’s escalating tensions with Japan over comments on Taiwan and broader risk-off sentiment—highlighted by equity and bitcoin sell-offs ahead of key U.S. data—are weighing on risk-sensitive currencies like the Australian and New Zealand dollars. However, there’s longer-term optimism as President Trump has rolled back tariffs on imported food, including Australian beef, boosting confidence in Australia’s export sectors. With resilient economic indicators and concerns about inflation, the Reserve Bank of Australia is expected to hold rates steady at 3.6%, supported by recent data and a cautious policy stance. One well know bank believes the easing cycle is over, and upcoming remarks from the RBA’s chief economist may reinforce a hawkish tone.