Germany’s inflation ticked up to 2.6% in November—its highest in nine months—mainly due to volatile travel and energy costs, even as underlying trends still point toward inflation easing below 2% over time. ECB President Christine Lagarde says current interest rates are appropriate, with no change expected in December unless new forecasts point sharply lower, though policymakers remain wary of risks like tariffs or supply disruptions. She notes the euro-area economy is proving more resilient than feared, even with soft spots in Germany and France. With most major central banks nearing the end of their policy shifts—and the Fed potentially the only one easing again in 2026—the dollar could face a downward phase that supports the euro. Geopolitically, the U.S. sees a “good chance” for progress on Ukraine talks, though Russia’s growing drone advantage may stiffen its bargaining stance. Investors this week will watch eurozone inflation, PMI surveys, and final Q3 GDP and employment data.

The yen has firmed slightly into early December as markets bet the Bank of Japan may finally raise rates, supported by steady domestic data and a softer U.S. dollar. Governor Ueda signaled that a December hike is on the table, pushing market odds above 70%, though policymakers want to see wage gains keep pace with inflation. Expectations of Fed rate cuts next year and a gradually tightening BOJ have tilted medium-term yield spreads in the yen’s favor, with some banks forecasting notable yen strength in early 2026. Still, doubts remain over how far the BOJ can tighten amid Japan’s loose fiscal stance and growing external risks, including weaker Chinese demand and geopolitical tensions. This week’s consumer confidence, household spending, leading indicators, and final PMI readings will give markets more clues on Japan’s economic trajectory.

Australia’s recent run of strong economic data suggests the economy is entering a cyclical upswing, supporting the RBA’s decision to stay on hold. Business investment—especially in data centers—has surged, housing prices and credit growth are climbing, consumer spending is improving, and both manufacturing and services activity have strengthened. A tight labor market and near-record government spending add further momentum, but higher-than-expected inflation and stagnant productivity mean the economy may be hitting capacity limits, making near-term rate cuts unlikely. Many analysts now expect the next move to be rate hikes in 2026, which could leave the AUD as one of the highest-yielding G10 currencies and a preferred risk and China-proxy play. This week’s 3Q GDP, alongside trade and household spending data, will offer a fuller view of the economy’s trajectory.