The greenback is bleeding less profusely this morning as traders cut risk ahead of next week’s Federal Reserve, Bank of England, and European Central Bank meetings. Equity futures are weaker, Treasury yields are down, and the Japanese yen is the only major currency posting gains relative to the dollar for the session.

European recession risks eased somewhat in January as the S&P Global flash composite Purchasing Managers’ Index rose to 50.2, breaking back above the 50 threshold that separates expansion from contraction. A warmer-than-expected winter, improving supply chain conditions, and large amounts of fiscal stimulus have helped the bloc’s largest economies weather a historic energy shock, but demand remains far below healthy levels, and the European Central Bank is likely to add to the pain next week as it ratchets interest rates another half percentage point higher.

The United Kingdom was less lucky. The flash composite Purchasing Managers’ Index tumbled to post-pandemic lows in January, falling to 47.8 from 49 in the prior month as consumer confidence remained weak. Price pressures faded somewhat, but remained elevated, putting the Bank of England on course toward delivering another half-percentage point hike in February before ending the tightening cycle with a quarter-point move in March.

The US equivalent, set for release at 9:45, is expected to show a deeper downturn in manufacturing paired with a modest improvement in the services sector. Data released yesterday showed the Conference Board’s Leading Economic Index falling for a tenth straight month in December, with weakness seen in virtually every indicator outside the labour market. Some have suggested that supply chains are simply recovering and consumer spending levels are coming back to earth after a post-pandemic boom, but the history of the series would suggest that a technical recession is in the offing within a quarter or two – if it hasn’t already arrived.

Failing another bombshell article from the Wall Street Journal’s Fed whisperer Nick Timiraos, the central bank is likely to hike rates by a quarter point at next week’s meeting. A number of officials—including those typically considered among the most hawkish on the rate-setting committee—clearly telegraphed their votes ahead of this week’s blackout period, and there’s little reason to think this Friday’s personal consumption expenditures report will deliver conclusive evidence of an end to the war on inflation.

Markets think the Bank of Canada will lift its benchmark lending rate by a quarter point at tomorrow’s decision – and economists are broadly in agreement. Few expect policymakers to definitively call time on this tightening cycle—instead, the statement and accompanying monetary policy report may highlight a more symmetrical balance of risks to the outlook, with inflation and other growth indicators showing evidence of a slowdown even as consumer spending and employment levels hold up. We remain on the fence with respect to the likely market reaction – subtleties in the language could impact odds on rate cuts by year end (markets are currently priced for two), but the Bank’s status as an early mover might also trigger a shift in other yield curves around the world.