- The “Donroe Doctrine” is in effect. Financial market implications should be muted.
- US jobs data to shape Fed outlook. Canada labor data also in focus.
- CPI watch for Australia, Eurozone, Sweden, Switzerland, and Norway.
The Donroe Doctrine
President Donald Trump launched the so-called “Donroe Doctrine” during a press conference after the capture of Venezuelan President Nicolás Maduro on Saturday. The Donroe Doctrine is Trump’s corollary to the Monroe Doctrine where the US assert and enforce primacy in the Western Hemisphere.
Financial market reaction should be muted as that foreign policy goal was clearly codified in the November 2025 US National Security Strategy. Short-term effect on crude oil prices will likely be contained given that Venezuela produces less than 1% of global crude oil supplies. Also, President Trump said that sanctions on Venezuela’s oil industry will remain in place for now.
Over the longer-term, the US control of Venezuela can weigh on crude oil prices. Venezuela holds the largest proven crude oil reserves globally, estimated at about 17% of global reserves or 303 billion barrels as of 2024. However, the reconstruction of crude oil infrastructure in Venezuela would take years because its oil sector requires rebuilding an entire ecosystem, not just turning wells back on.
USD Poised to Extend 2025 losses
USD closed 2025 lower against all major currencies, with the dollar index posting its steepest annual decline since 2017, undermined by US policy shocks (tariffs, data reliability, fiscal worries, threats to the Fed’s independence) and the Fed catching up with global peers on interest rate cuts.
Relative monetary policy remains a drag for USD. The Fed has room to deliver the 50bps of easing priced-in by Fed funds futures in 2026. US labor demand is weak and upside risks to inflation are fading. In contrast, most other major central banks are done easing.
US December nonfarm payrolls (NFP) print takes the spotlight (Friday). Consensus is looking for +59k job gains in December vs. +64k in November and -105k in October due to the government shutdown. The significance lies less in the headline job gains, and more in the sector generating them. In November, virtually all job gains came from the non-cyclical health care and social assistance sector, a pattern that has historically signaled an impending labor market slowdown.
US December ADP employment and November JOLTS reports are also policy-relevant (both due on Wednesday). Consensus expects ADP private payrolls at +48k vs. -32k in November. For reference, the ADP weekly employment preliminary estimate showed private employers added an average of 11.5k jobs a week for the four weeks ending December 6. Meanwhile, further declines in the JOLTS hiring and quit rates would add to signs of worsening labor demand.
US December ISM manufacturing index is expected to show a slower contraction in manufacturing sector activity (Monday). The headline index is projected at 48.4 vs. 48.2 in November. Watch the prices paid and employment sub-indexes to see if inflation risks continue to recede and/or job losses deepen.
US December ISM services index is expected to remain indicative of solid services sector activity (Wednesday). The headline index is projected at 52.3 vs. 52.6 in November. However, a further decline in the prices paid sub-index would support the case for additional Fed funds rate cuts.
US Q3 non-farm productivity data is noteworthy (Thursday). Productivity (GDP/hours worked) is expected at 4.7% SAAR vs. 3.3% in Q2, which would be well above the post-war annual average of 2.1%. An AI-driven productivity boom is the main upside risk for USD as it would allow the Fed to keep policy restrictive for longer. Faster productivity raises potential growth rate, supporting stronger economic activity without triggering inflation.
Still, we think it’s too soon for AI-driven productivity gains to be evident. Although AI adoption has risen meaningfully since 2023, overall penetration remains low, suggesting that productivity gains will take time to diffuse across the broader economy. Historically, it took decades – often 20 to 50 years – for general purpose technology (steam power, electricity, combustion engine, information & communication) to fully realize their transformative potential.
CPI Checkpoint
Australia, Eurozone, Sweden, Switzerland, and Norway all report CPI prints this week. The data is unlikely to move the needle on these countries’ central bank guidance and should have little effect on currency markets.
Australia November CPI is due Tuesday. Headline CPI is expected at 3.6% y/y vs. 3.8% in October and the policy-relevant trimmed mean CPI is seen at 3.3% y/y vs. 3.3% in October. The RBA projects headline and trimmed mean annual inflation of 3.3% and 3.2% by December, respectively. At its last December meeting, the RBA stressed it’s done easing, warning “the risks to inflation have tilted to the upside.” RBA cash rate futures imply nearly 50bps of rate increase in 2026.
Eurozone December CPI is due Wednesday. Headline CPI is expected at 2.0% y/y vs. 2.1% in November and core CPI is seen at 2.4% y/y for a fourth straight month, matching the ECB’s 2025 projection. The ECB is in a good place to keep rates on hold at 2.00% for some time with the next move a hike. The swaps curve price-in steady rates over the next twelve months and a full 25bps rate increase to 2.25% in the next two years.
Sweden December CPI is due Thursday. CPIF is expected at 2.4% y/y (Riksbank forecast: 2.6%) vs. 2.3% in November while CPIF ex-energy is projected at 2.6% y/y (Riksbank forecast: 2.6%) vs. 2.4% in November. The Riksbank signaled it’s done easing with the next move a hike. The swaps curve price-in 70% odds of a 25bps rate increase over the next twelve months.
Switzerland December CPI is due Thursday. Headline CPI is expected at 0.1% y/y vs. 0.0% in November and core CPI is seen at 0.4% y/y for a second straight month. The Swiss National Bank (SNB) forecasts headline CPI inflation to average 0.1% y/y in Q4 and signaled that the bar is high for negative rates. The swaps curve price-in the policy rate to remain at 0.00% over the next twelve months and a 25bps rate increase to 0.25% in the next two years.
Norway December CPI is due Friday. Headline is expected at 2.9% y/y vs. 3.0% in November and underlying CPI is seen at 3.0% y/y vs. 3.0% in November. If so, inflation would match the Norges Bank’s forecast. Aside from the Fed, the Norges Bank is the only other major central bank with an easing bias. The swaps curve implies one 25bps cut in the next twelve months and the policy rate to bottom at 3.75%.
Japan Wages in Focus
Japan November labor cash earnings data is due Wednesday. Cash earnings are expected at 2.3% y/y vs. 2.5% in October. The less volatile scheduled pay growth for full-time workers is forecast at 2.4% y/y vs. 2.1% in October.
In our view, the bar for additional Bank of Japan (BOJ) rate hikes is low which is JPY positive. The BOJ has warned that “the risk of firms' active wage-setting behavior being interrupted is low”, implying that underlying wage and inflation pressure are likely to persist. Moreover, the policy rate (0.75%) is still below the BOJ’s estimate of the neutral range between 1% and 2.5%.
Canada Jobs in Focus
Canada December labor force survey is due Friday. The economy is expected to lose -2.5k jobs after surprising with strong gains of 53.6k in November, 66.6k in October, and 60.4k in September. The Bank of Canada (BOC) is finished cutting with the next move a hike. The swaps curve price-in 60% odds of a 25bps rate increase to 2.50% over the next twelve months.
Holding at 4.25%
Bank of Israel is seen keeping rates on hold at 4.25% (Monday). At its last November meeting, Bank of Israel delivered on expectations and reduced the policy rate by 25bps. That was the first cut since January 2024. The Bank of Israel can afford to be patient before resuming easing because headline inflation has been sticky above the 2% target since August. Overall, Israel’s positive real interest rates and favorable balance of payment backdrop remain important tailwinds for ILS.
Peru’s central bank (BCRP) is widely expected to keep rates on hold at 4.25% (Thursday). The BCRP assesses the current interest rate level to be “very close to the level estimated as neutral (4.00%)”. Peru’s positive real interest rates, favorable balance of payments backdrop, and firm copper prices bode well for PEN.
