Good to be Back

December 12, 2025

Elias Haddad

Reappointment of regional Fed presidents calms independence fears.

Second-tier US economic data due today. Fed speakers take the spotlight.

GBP lags after UK October GDP miss.

USD recovered some of yesterday’s losses and trading close to the middle of its range in place since June. The MSCI All Country World Index rallied to a record high yesterday underpinned by Fed easing and resilient global economic activity. USD has room to edge down to the lower-end of its range as it converges towards the level implied by US-G6 rate differentials.

The Federal Reserve Board of Governors unanimously reappointed 11 of the 12 regional Fed presidents to new five-year terms which begins on March 1, 2026. Atlanta Fed President Raphael Bostic previously announced he would retire at the end of his term on February 28, 2026. The reappointments underscore institutional continuity, and ease worries about political interference at the Fed.

Philadelphia Fed President Anna Paulson (2026 FOMC voter) speaks on the economic outlook (1:00pm London, 8:00am New York). Paulson leans cautiously dovish. In her last November 20 speech, she noted “On the margin, I’m still a little more worried about the labor market than I am about inflation.”

Staunch hawk Cleveland Fed President Beth Hammack (2026 FOMC voter) speaks half-an-hour later, followed by Chicago Fed President Austan Goolsbee (2025 FOMC voter) (3:35pm London, 10:35am New York). Goolsbee voted to keep rates on hold at this week’s FOMC meeting.

In our view, the Fed will deliver more than the one cut it has penciled in for next year. US labor demand is weak and upside risks to inflation are not martializing. Next week is key with November non-farm payrolls and CPI on deck. Fed funds futures fully price-in 50bps of total easing in the next twelve months.

GBP is trading on the defensive. UK real GDP unexpectedly shrinks in October. Real GDP dipped -0.1% m/m (consensus: 0.1%) vs. -0.1% in September and is tracking below the Bank of England’s (BOE) Q4 projection of 0.3% q/q. Growth was weighed down by services and construction output, which fell -0.3% m/m and -0.6% m/m, respectively. Production output rose 1.1% m/m following a fall of -2.0% in September.

Leading indicators point to soggy UK economic activity with real GDP growth slightly below potential growth of around 1.4% a year. As such, the BOE has room to ease policy further and GBP can continue to underperform on the crosses. The UK swaps curve has virtually fully priced-in a 25bps BOE rate cut to 3.75% at the next December 18 meeting and 60bps of total easing over the next twelve months.

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