By Michael Every of Rabobank
The Fed delivered what was expected – a 25bps rate cut to 3.75% and a deep public split over whether it should cut further because the labor market is weakening or keep policy tight because inflation is too high. The Fed will also buy $40bn of T-Bills just after stopping QT, but this is not to be seen as QE, nor as having any impact on monetary policy - and QE was a neutral “asset swap”, not a balance sheet expansion that juiced asset prices. Europe's existential crisis” and didn’t think the level of ECB rates could do anything about it. She underlined estimates that internal trade barriers due to national regulations on top of the EU’s own amount to an effective tariff of 110% on services and 60% on goods traded between member states. “Everybody wants to sugarcoat, gold-plate and do just a bit more,” yet on reforms, “There will be pushback from multiple corners… from people who say: ‘We’re very happy in our corner of Europe, leave us alone.’” (As ‘raiding China’s Temu over a foreign subsidy allegation.) Lagarde underlined the need for a transformative capital markets union and joint Eurobonds for defence funding, seeing this as opportunity.
The BoC left rates on hold at 2.25% and seems to think it’s done, yet admitted it‘s difficult to “assess the underlying momentum of the economy,” given US tariffs’ impact over time. market chatter of rate hikes in 2026, will look at the jobs numbers today (-21.3K vs +20K expected) and perhaps rethink. But what of asset prices as the AFR notes, ‘force it to speed up post-America defence plans, with belated recognition that the era of America’s “security guarantee” for Europe is over. It seems Europe will have to pay much more than it has budgeted for the military by 2035, and a lot sooner. That’s as a report suggested a parallel US National Security Strategy to split up the EU and establish a new global “C5” of the US, China, Russia, India, and Japan, leaving Europe out of the power loop.
Germany’s Chancellor Merz nonetheless underlined he still wants the US as partner, and if Trump "can't make sense of this institution or the structure of the EU," the US can still cooperate with member states, and “Germany is, of course, first and foremost one of them.” Divide et impera.
Regardless, the EU is pressing harder for the passage of its €210bn Ukraine loan scheme, which Iran has started mass production of ballistic missiles again. Trump will also delay unveiling his Gaza Board of Peace members until 2026, and it’s reported that the US is weighing hitting the UN Palestinian refugee agency UNWRA with terrorism-related sanctions.
If you think that’s too much information to fit into a Global Daily, try writing it(!) Moreover, consider this is just one day, in one week, in one month, in what has been a non-stop year for wild news headlines. 2026 doesn’t look like it’s going to get any easier. Quite the opposite, in fact.
You might not see it all as an existential crisis, just a ‘volatile trading backdrop’, but trying to keep up with just that part for readers can certainly prompt one for those who try!