Do Not Trust Politicians: the Market Makes Its Own Decisions

EUR/JPY

Key zone: 183.50- 184.50

Buy: 185.00 (on strong positive fundamentals) ; target 187.00-187.50; StopLoss 184.30

Sell: 183.00 (on a pullback after retesting the 184.50 level) ; target 181.50; StopLoss 183.70

The financial market is an extremely sensitive and nervous system. Investors, politicians, regulators, and commentators with varying levels of responsibility continuously generate information noise: they promise, intimidate, hint, and contradict themselves. Over the past two weeks, the information space has been overloaded with discussions about the future monetary policy of leading economies — first and foremost, the European Central Bank.

Where Did the Idea of the ECB Ending Its Rate-Cutting Cycle Come From?

In early December, ECB Executive Board member Isabel Schnabel, in private comments, allowed for the possibility of rate hikes next year. It is important to emphasize: this referred exclusively to a hypothetical scenario, without concrete benchmarks, timelines, or signals of a policy shift.

Nevertheless, the market immediately began speculating on monetary tightening in the euro area.

Formally, the ECB is indeed closer than other major central banks to a potential policy pivot: according to current expectations, the Federal Reserve and the Bank of England will continue easing in 2026. However, no decisions, votes, or official signals from the ECB are scheduled in the near term.

Inflation remains the key factor for the regulator. If inflationary pressure accelerates, tightening would indeed become possible. At present, inflation is near the ECB’s target, while its future trajectory remains highly uncertain.

We believe that a change in European interest rates is unlikely earlier than six months from now. From a market-logic perspective, the current panic looks excessive.

Second Example — the Yen and Verbal Support for Interventions

A similar situation has developed around the Japanese yen, which received verbal support from authorities.

Japan’s Finance Minister Satsuki Katayama pointed to the high level of public debt and allowed for the possibility of reducing new bond issuance in the fiscal 2026 budget. Against this backdrop, the market reacted sharply: StopLoss orders were triggered on both sides, despite the fact that the potential impact of such measures is, at best, medium-term in nature.

Without actual fiscal decisions or changes in Bank of Japan policy, such statements are incapable of producing a sustained strengthening of the yen.

Information pressure increases short-term demand for safe-haven assets, temporarily supporting JPY. However, there is no solid фундамент under this move.

U.S. Statistics as a Source of Distrust

Additional disorientation comes from recent U.S. macroeconomic data.

A telling example is GDP data:

U.S. economic growth in Q3 reached 4.3%, versus forecasts of no more than 3%;

at the same time, the GDP deflator indicates that a significant portion of this growth was driven not by real output expansion, but by rising prices.

This raises a logical question: how can the economy show such a high growth rate amid rising unemployment, slowing inflation, weak business activity, negative industrial dynamics, and soft retail sales?

The only explanation is statistical distortion and temporary support from import tariffs introduced by the Trump administration.

After the GDP release, market-implied probability of a Fed rate cut in January fell below 10%.

The Political Factor and Monetary Expectations

However, the very idea of long-term monetary policy forecasts is questionable. Donald Trump has publicly stated that he will not appoint a Fed Chair who disagrees with him. Under such conditions, fundamental factors risk becoming secondary, while speculative interpretations of political statements will be actively exploited by the market.

Long-term prospects for the dollar remain uncertain. At the same time, the potential for dollar weakness may increase depending on the outcomes of key macroeconomic releases scheduled for January. Until then, the market is likely to remain in a regime of heightened sensitivity to words rather than actions.

So we act wisely and avoid unnecessary risks.

Profits to y’all!