Just when we all thought this year would be the year of the cut combined with lovely gentle markets, the US economy and geopolitics stirred us out of our post-festivities slumbers.

Just when you thought it was safe to relax and think about turkey and the upcoming festive season, the US Federal Reserve came along.

While last week was all about employment, this week it’s all about central banks, with the Fed, the BoE, and the ECB all set to meet over the coming days. More about that anon. Most of the currency market, except for the Japanese yen, marked time last week ahead of Friday’s Non-Farm Payrolls data, which was eventually announced were stronger than expected. The response was immediate with the dollar gaining roughly 1%.

The last month of the year has started, and certainly, there is a chill in the air in London, not on Wall Street, where stock markets had an excellent week. Indeed, US stocks had the second-best November since the 1980s. With interest rates seemingly at their peak in the US, traders' appetite for risk has returned with a vengeance, and all looks good for 2024 and beyond.

Depending on your standpoint, the markets enjoyed or endured a very quiet week last week. The combination of a lack of top-tier data and a surfeit of Turkey and Pumpkin Pie in the US put paid to any energy that there may have been. With this background, it was no surprise that the currency markets traded sideways, with action postponed to this week.

Last week saw the publication of inflation figures both here and in the US. Both sets of figures certainly seem to point to a taming of inflation, and the UK's will have brought a much-needed bit of cheer to the otherwise beleaguered Prime Minister as he achieved his target of halving inflation.

The markets continued to digest the recent central bank meetings this week whilst keeping a wary eye out for further developments in the Middle East. It felt like every central banker going took their turn at the speakers' rostrum during the week. Did we learn anything new?

The Fed and Old Lady came to the stage last week with markets on tenterhooks waiting for a surprise, and as if in concert, they delivered everything but a surprise. As expected, there were no changes in interest rates and the prospect of higher for longer was reinforced once again. Whether they both will need to raise rates again is most definitely in the balance. Firstly, the Fed is relying on the US Bond market to do the “heavy lifting” that, in reality, fiscal policy should be doing, which so far has been working. The premise that higher long-term rates temper Main Street’s spending is true, but sooner or later, bond rates will drop as spending dries up, and then what? A tricky path for Jay Powell to tread, and unsurprisingly he left the door ajar for more tightening. His opposite number in the UK, Andrew Bailey, also has issues to confront. With public and private sector salaries still roaring ahead, his concern should be that the UK gets into a wage push inflation cycle and interest rates have to rise more.

The markets, understandably, have remained fundamentally "headline driven" as they await further developments from the Middle East with a bias towards risk off. This sentiment has continued to benefit the dollar against its peers, whilst gold, oil, and Bitcoin have also had their fans. The dollar, of course, is being helped by the continuing strength of the US economy, as shown, but GDP is coming in at 4.9%, beating expectations. However, the Fed's favoured inflation indicator, the PCE Deflator, came in pretty much as forecast. With data still this strong, it is understandable that US 10-year bonds continue to yield around 5% and with the high level of upcoming issuance, it's hard to see them retreating too far from these levels.

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