Investors Anticipate Rate Cuts as Inflation Eases, Eyes on Powell's Upcoming Speech

According to Yahoo News, investors are preparing for a promising start to December in Europe, expecting central banks to begin cutting rates soon. However, a 'fireside chat' with Federal Reserve Chair Jerome Powell later in the day could impact these expectations. Manufacturing PMIs from various European countries will offer a clearer view of the region's economy, while futures suggest a higher opening for European stock markets. Inflation data from both the euro zone and the U.S. on Thursday indicated easing inflation, fueling expectations of rate cuts by central banks. Money markets are pricing in over 100 basis points in rate cuts next year from both the Federal Reserve and the European Central Bank. The gap between financial markets and central banks has widened as central banks resist rate cut discussions, while markets consider the recent benign inflation data. Federal Reserve policymaker Christopher Waller, a prominent and hawkish voice, expressed growing confidence that inflation would return to its 2% target, encouraging markets to take on rate-cut bets. Markets are now pricing in a 46% chance of the central bank cutting rates in March, according to the CME FedWatch tool, up from 27% a week earlier. Powell's speech later on Friday will be closely watched, with his comments on policy and rates potentially influencing market movements.