North American FX Open - Trump has "productive" talks with Mexico president

Main news today stays with all things Trump/tariffs, with the Mexican peso rallying to outperform all emerging-market peers after the US President-Elect said he had a "productive" conversation with Mexico’s president Claudia Sheinbaum.

Recall, USD/MXN had risen sharply earlier this week in response to Trump’s comment for 25% tariffs on Mexico, though latest developments suggest the threat was likely a bargaining chip to unlock other policy agenda, which in this case appears to be migration, drugs.

Overnight in Europe, WUNSCH ruled out aggressive ECB cuts, noting that if inflation slows to target earlier than expected, officials can justify "reducing rates in a gradual manner". "If you would suddenly accelerate the rate cuts while domestic inflation is still above 2.5%, I’m not sure we would give a very good signal," he said. "It might be perceived that we have a much more negative view on the economy."

Regional inflation data out of Germany showed most states printed higher CPI y/y reads (NRW the exception). The results suggest a small rise of headline HICP inflation in November, broadly in line with consensus expectations.

Spanish inflation meanwhile quickened to the fastest pace since August, though the acceleration was driven by base effects. CPI advanced 2.4% y/y in Nov, up from 1.8% in October and matched the median estimate. Core CPI eased to 2.4% vs predictions for it to also quicken.

Other data revealed EZ Nov. Economic Confidence inched up slightly to 95.8 from 95.7 in Oct, and vs the 95.2 estimate.

In Australia, the RBA's BULLOCK stated that core CPI is 'too high' to consider a rate cut in the near-term and that there is still some way to go to sustainably return CPI to the 2-3% goal. Policy is to remain restrictive until the RBA is confident on CPI, though forecasts show a sustainable return to target is not expected until 2026, she warned. The RBA Gov also said the board will consider a rate cut if CPI keeps moving as expected, but cautioned over more likely global supply shocks.

In other news, Australia’s planned overhaul of the Reserve Bank, which includes splitting its board in two, has been passed by the Senate.

In USD/YEN, Japanese investor dip buying has left a 150.46 bottom in place for now. Latest moves coincide with reports that a senior member of an opposition party who is part of Japan PM Ishiba’s minority government stated the BOJ likely won’t change policy abruptly enough to derail budget discussions.

Looking ahead, and there is no US data due for release today or Friday, due to Thanksgiving Day holidays.

Thin market liquidity may in turn exacerbate choppy moves, with the main downside risk to the USD probably stemming from related rebalancing flows.

Canada's CFIB business barometer for November and Q3 C/A provide the sole data releases, with another deficit forecast (-Cad 8.73bln).

On the central bank front, Riksbank's Bunge and the ECB's Villeroy, Knot and Lane are scheduled speakers.

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