Signal over Noise with Ulrike Hoffmann-Burchardi
At a Glance
The desk believes that the macroeconomic conditions are shifting favorably, supported by a combination of US monetary and fiscal stimulus. Per the full note source, this unique alignment, although not as aggressive as the past crisis responses, is likely to provide tailwinds moving into 2026. The anticipated 25 basis point cut by the Federal Reserve, resulting from lower than expected inflation and a weakening labor market, reinforces this view. As consensus data shifts towards further easing, the desk aligns with the expectation that upcoming non-farm payrolls data due on December 16 will be pivotal in shaping the Fed's next moves.
Key Takeaways
- 01Anticipating a 25 basis point Fed rate cut due to soft inflation and labor data.
- 02Synchronized fiscal and monetary stimulus may provide tailwinds for markets.
- 03Median inflation expectations declining suggest easing Fed policies.
- 04Upcoming non-farm payroll data is critical for future Fed direction.
Full Analysis
What the desk is arguing
The desk anticipates beneficial changes in macroeconomic support, buoyed by synchronized monetary and fiscal activities. This expectation is backed by UBS's analysis indicating likely Federal Reserve rate cuts that could stimulate growth moving into 2026.
Supporting this outlook are recent economic indicators: a modest rise in core PCE inflation of only 0.2% and a concerning decline in private employment numbers, both suggesting that the labor market is under pressure. Additionally, median inflation expectations dropping to 4.1% highlight the Fed's increasing flexibility to cut rates further.
Where it sits in our coverage
UBS has set a target of 1.075 for the currency pair in question. Meanwhile, jpmorgan has a target of 1.10 for March 2026, while bofa stands in contrast with a significantly lower target of 1.04 for the same tenor.
This perspective aligns closely with the prevailing view among institutions, suggesting an overall hawkish tilt, although our target is at the upper end of the market range compared to bofa's more bearish outlook.
How other firms see it
There is alignment among firms like jpmorgan who share a positive outlook, while bofa presents a diverging, more cautious stance. This divergence highlights a crucial strategic decision for traders in assessing these competing forecasts.
With the anticipated Federal Reserve decisions and their implications for USD interest rate movements, currency pairs like USD/JPY may reflect heightened volatility as expectations adjust to the evolving economic landscape.
Market Implications
Traders should watch the reaction of USD/JPY as it closely correlates with Fed policy, particularly around the December 16 non-farm payroll data release, which could influence expectations for further rate cuts.
From the original
Tune in at the start of the trading week ahead of the New York opening bell as Ulrike Hoffmann-Burchardi, CIO Americas and Head of Global Equities for UBS Wealth Management, briefs you on what’s the signal, and what’s just noise in the markets. Recorded on 7 December 2025.
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The desk believes that last week's FOMC rate cut, accompanied by modestly improved economic projections, signals a favorable environment for equities and a cautious optimism around further monetary easing. Per the full note [source], while the rate adjustment was anticipated, the Fed's GDP growth and inflation forecasts for 2026 were notably revised upwards, suggesting more robust economic conditions than previously projected. This sets the stage for traders to position themselves for potential further cuts. Given the current economic trajectory, the desk maintains a positive outlook, although broader market volatility remains a consideration.
Signal over Noise with Ulrike Hoffmann-Burchardi
The desk believes the US macroeconomic outlook is strengthening, driven by favorable earnings reports and positive CPI data leading into the October FOMC meeting. Per the full note from UBS' Ulrike Hoffmann-Burchardi, the benign CPI print suggests inflationary pressures are dissipating, positioning the Fed for a likely 25 basis point cut soon. This dovish pivot, coupled with improved earnings leading to potential GDP growth, indicates a bullish sentiment for the USD ahead of major policy adjustments. Furthermore, the desk anticipates **three broad disinflationary forces** will continue to support this outlook into 2026, reflecting robust market dynamics.