A look at the day ahead in European and global markets from Tom

Westbrook

The Bank of Japan left interest rates on hold, as expected,

clearing the way for traders to sell the yen - which fell to a

one-month low against the dollar - and then switch their focus

to the Bank of England's decision later in the day.

A cautious outlook from the Federal Reserve has already

set stocks tumbling and the dollar soaring. It also forced

investors to confront some of the risks - inflationary or

otherwise - that could accompany an unpredictable U.S.

administration as President-elect Donald Trump prepares to take

office.

Sterling may be ruffled next.

Britain's currency has been supported by the relatively

hawkish market expectations for BoE policy - its 1% fall for the

year so far is the smallest of any G10 currency against the

dollar.

After hot UK wages data earlier in the week, markets are

expecting rates to stay on hold at 4.75%. Fifty basis points of

cuts are priced in to 2025, with the first 25 bp cut fully

priced for May. That could shift if policymakers sound

particularly hawkish.

The Fed on Wednesday cut interest rates by a quarter of a

percentage point, as expected, but signalled a slower pace of

easing ahead.

Fed officials raised their median projection of where they

see the long-run neutral rate, significantly raised their 2025

inflation outlook, and continued to sketch out a path of further

rate cuts next year.

The dollar extended its gains in Asia, pushing South Korea's

won to a 15-year low. Stocks fell.

New Zealand data showed the economy sank into recession in

the third quarter, bolstering the case for more aggressive rate

cuts and sending the kiwi to a two-year low.

Thursday also brings central bank meetings in Norway and

Sweden.

Norway's central bank, in contrast with other western

central banks, will likely keep interest rates at their highest

level since 2008, supported by economic growth, above-target

inflation and a weak local currency.

Sweden's central bank will likely cut its key rate by a

quarter point, with further policy easing ahead early next year

if inflation remains under control, a Reuters poll of economists

showed.

Key developments that could influence markets on Thursday:

- Central bank decisions in Britain, Norway and Sweden