Global markets are preparing for a busy week focused on the Fed’s decision

The much-anticipated December meeting of the US Federal Reserve is finally upon us, but it’s not the only major event on investors’ radar. A cluster of major central banks – including those in Canada, Switzerland, Australia and Turkey – will also decide policy, while new economic data from China will give investors another chance to gauge the world’s second-largest economy.

Fed showdown looms large

Speculation about whether the Fed will make a third rate cut next week has increased dramatically since October’s cut. After a period of uncertainty, Wall Street has again priced in a big chance of easing – almost as if the cut was guaranteed.But policymakers themselves remain far from united. Several members are moderate, while others have retreated, and President Donald Trump continues to pressure the central bank to cut spending more aggressively.

Fed Chairman Jerome Powell underscored the internal divide by pointing to “starkly different views on how to move forward,” a comment that tempered expectations and reminded investors that nothing is certain.

Complicating the picture is the lack of clarity around the data after the US government shutdown delayed major releases. November inflation data, due next week, could impact trader sentiment, although crucial October/November employment data won’t be released until the Fed meets.

While interest rate futures are still trending toward a quarter-point cut, the odds have fluctuated, sometimes falling below 50%.

China’s growth slowdown continues

China’s real estate crisis and sluggish domestic demand continue to weigh on the Chinese economy as the year draws to a close. Investors are now looking for signs that Beijing will roll out further stimulus measures.Monday’s upcoming trade data and Wednesday’s inflation numbers could reinforce concerns, especially as bankruptcies remain a recurring theme. China Vanke – once the country’s largest homebuilder – is asking for a one-year extension of domestic bond repayments. Bondholders will vote on December 10.

Elsewhere in the Asia-Pacific, the Reserve Bank of Australia meets on Tuesday and is widely expected to keep interest rates steady as the economy remains relatively resilient.

Switzerland remains frozen on rates

It is almost certain that the Swiss National Bank will keep interest rates at 0% on Thursday, with no change expected in 2026. Inflation has pushed to the lower end of the SNB’s comfort range, and while officials expect a gradual increase, they have indicated they can tolerate a temporary dip below zero.

The bigger challenge may be the Swiss franc itself. The currency has appreciated almost 12% against the US dollar this year – on track for its best performance since 2002. In 2025, the currency will have barely appreciated against the euro, but in five years it has risen about 14%.

With Europe accounting for around half of Switzerland’s exports, the franc’s continued strength is putting pressure on exporters from all sectors, from luxury watchmakers to asset managers.

Turkey is preparing a new cutback

Turkey’s central bank is widely expected to cut rates again on Thursday, although the magnitude of this move remains a matter of debate.

Headline inflation for November fell slightly to just over 31%, helped by softer food prices. But persistent inflation in the services sector – especially rents – continues to pose challenges.

With the current policy rate at 39.5%, markets are closely watching this final meeting of the year to gauge the pace of easing in 2026. JPMorgan considers a cut of 100 basis points likely, although a larger step of 150 basis points is not off the table.

Meanwhile, Brazil’s central bank meets on Wednesday and is expected to keep its benchmark interest rate at a two-decade high of 15%. Still, a sharper-than-expected economic slowdown has prompted some traders to speculate that a rate cut could come as early as January.

Optimism fuels market bets for 2026

Despite a turbulent backdrop – from Bitcoin’s sharp pullback in November to the turbulence in Japanese bonds – investor sentiment heading into 2026 appears surprisingly bright.

Several major institutions are leaning toward a “reacceleration trade,” betting that global growth will stabilize and fuel a broad stock rally. Lombard Odier says this environment could support a “diversified” rise in global equity markets, while BNP Paribas has delivered growth above consensus for the eurozone.

The euro has strengthened, tech stocks are holding up despite the rattle of an AI-driven bubble, and US stocks continue to attract heavy capital flows.

Still, in markets where consensus trades often break down, optimism in itself can be a reason for caution.

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(Disclaimer: This article comes from Reuters)