Germany’s October data point to tentative signs of stabilization rather than a strong recovery: industrial production rebounded by a much stronger-than-expected 1.8% month on month, supported by construction and capital goods, following a second consecutive rise in manufacturing orders. While this suggests German industry may be bottoming out, momentum still looks sideways. Planned government measures—potentially up to €1 trillion in investment and lower energy costs—could support a cyclical upswing. At the same time, ECB’s Isabel Schnabel signaled that rates are likely at their floor for now, noting resilient euro-area growth, sticky inflation, and possible upward revisions to ECB growth forecasts, while warning that disinflation has recently stalled and bears close watching.

USDJPY rebounded after reports of a major earthquake in northern Japan, as investors cautiously moved into the dollar while assessing whether the damage could delay the BOJ’s expected policy tightening. While past earthquakes have sometimes strengthened the yen through repatriation flows, markets currently assume damage is limited and still see a BOJ rate hike in December as the base case, albeit with risks of a longer pause given weak Q3 GDP and heightened caution after the quake. Looking ahead, further yen strength likely depends more on aggressive Fed rate cuts, as Japan’s combination of loose fiscal policy, cautious monetary tightening, and weak economic data—reinforced by disappointing November Eco Watchers survey results—continues to undermine confidence in a sustainably stronger yen.

The RBA kept the cash rate unchanged at 3.60%, but its December statement struck a mildly hawkish tone. By noting that inflation risks have tilted to the upside, private demand is recovering, and that it will do whatever is necessary to ensure price stability, the Bank pushed back against expectations for early rate cuts and left the door open to further tightening if needed. Markets appeared to have hoped for a softer message, which explains the muted initial AUD reaction. Separately, November NAB survey data showed business confidence easing to its lowest level since April while conditions remained solid, suggesting a cooling in momentum rather than a sharp downturn, with future risks depending on whether confidence and forward orders weaken further.