Currency market volumes are rebounding as participants return to their desks and position for a reversal of the US exceptionalism trade that dominated throughout 2022. The dollar is weaker against every other major this morning, and yields are softer across the front end of the curve – even as traders brace for relatively-hawkish meeting minutes from the Federal Reserve later in the day.

The Aussie is a clear outperformer after Chinese authorities began discussing an end to an unofficial ban on Australian coal imports. Unconfirmed reports circulated by Bloomberg and Reuters this morning suggest the National Development and Reform Commission will soon allow some of the world’s biggest importing companies to begin purchasing new supplies. The Aussie, loonie, and Nokkie sold off in recent weeks as raw materials prices buckled in the face of a deeper Chinese economic contraction and oil prices slumped on weaker refinery flows – but are now rebounding on narrowing interest differentials and expectations for longer-term demand growth in commodities.

European yields are down and the common currency is trading at a discount after France reported softer-than-expected inflation data this morning, joining Germany in relieving pressure on short-term interest rates. But fiscal measures did most of the heavy lifting in both countries, shielding households against higher energy costs, and price indexes are still rising at an uncomfortably-fast pace. European Central Bank Governing Council member Martin Kazaks yesterday said “In the next two meetings I think we can still do quite large steps,” helping reinforce market expectations for 50 basis-point moves in February and March.

Debt ceiling risks became more acute yesterday when US Representative McCarthy lost three consecutive votes to become House Speaker, suggesting that a significant number of his colleagues are unwilling to reach the sort of compromise needed to pass legislation. A repeat of 2011’s standoff looks possible, even if several decades of experience shows neither party can plausibly claim to represent fiscal conservatives. The House of Representatives reconvenes at noon.

Consensus forecasts suggest job openings fell to 10.1 million in November from 10.3 million in October. We think a sub-10 million number is possible, given other signs of growing caution across the US corporate sector, but an aging population and other labour market frictions should keep the ratio between vacancies and available workers near historic highs.

Sentiment in the manufacturing sector is seen slipping further, with the Institute for Supply Management’s index considered likely to fall to 48.5 in December from 49 in the prior month.

The Federal Reserve will release minutes from its December meeting at 2 pm. Investors will focus on the factors that led officials to raise inflation and terminal rate forecasts for 2023, but market reaction could be surprisingly subdued. Markets rarely miss an opportunity to misinterpret central bank communications, but Chair Jerome Powell provided relatively clear insight into the committee’s decision process during the post-announcement press conference, minimizing the risk of a hawkish surprise at this juncture.