Fabio Panetta says the global monetary system is likely to become more multi-polar, with several major currencies alongside a still-dominant dollar, offering diversification but also higher risks if policy coordination weakens. Europe is trying to strengthen the euro’s global role through better payments, liquidity tools, digital finance, and deeper capital markets, but markets are currently leaning hawkish on ECB policy after comments from Isabel Schnabel, largely pricing out rate cuts in 2026. Even so, some ECB officials still see scope for easing if inflation undershoots or growth weakens, especially as higher US tariffs, a stronger euro, and cheaper Chinese imports could prove disinflationary for the euro area. Geopolitical tensions add further pressure, with President Trump’s comments on Ukraine fueling fears of weaker US–EU coordination, which typically weighs on the euro by increasing risk premiums on European assets.

Governor Ueda signaled that the BOJ is increasingly confident Japan is nearing sustainable 2% inflation, reinforcing expectations of a rate hike to 0.75% at the December 18–19 meeting and a gradual path toward policy normalization. Despite this, the yen has weakened, with USDJPY rebounding from recent lows as markets focus on the upcoming FOMC meeting and the risk that a Fed rate cut comes with hawkish guidance. One Japanese bank notes that ongoing skepticism over whether the BOJ will raise rates to 1% or higher is limiting yen strength, as investors remain reluctant to take large long yen positions without a clearer, more explicitly hawkish signal from the BOJ.

The RBA left the cash rate unchanged at 3.60% as expected, but its statement and Governor Bullock’s comments signaled a mildly hawkish stance. By highlighting that inflation risks have tilted upward and stressing the Board’s willingness to act if needed, the RBA pushed back against expectations for early rate cuts and kept the door open to further hikes. Bullock reinforced this tone by saying cuts are not foreseeable and that conditions for future hikes were discussed, which supported the Australian dollar; going forward, the AUD should remain resilient, with a hawkish Fed also helping, while a surprise dovish Fed move could spark sharper upside through improved global risk sentiment.