• Tuesday:
  AU-JP-EZ-UK-US PMIs, UK Unemployment Rate.
• Wednesday:
  Australia CPI, German IFO, BoC Policy Decision.
• Thursday:
  ECB Policy Decision, US Durable Goods, US GDP Q3, US Jobless Claims.
• Friday:
  Tokyo CPI, Australia PPI, US Core PCE.

Tuesday

The ONS last week published
only the figures on the workers’ earnings, vacancies and real time information
on employment. The rest of the UK labour market data was pushed back to this
week due to falling response rates to the LFS survey. The consensus sees the
Unemployment Rate to remain unchanged at 4.3%.

Throughout
the day we will get the PMIs for Australia, Japan, Eurozone, UK and the US. At
this point they are unlikely to influence the near-term policy outlook
as the central banks are expected to keep rates steady as they gather more data
and let the monetary policy lags filter through the economy. The market is more
likely to react to downside surprises given the recent rise in long-term
yields. The most important ones will be the Eurozone, the UK and especially the
US PMIs:

• Eurozone Manufacturing PMI 43.7 vs. 43.4 prior.
• Eurozone Services PMI 48.7 vs. 48.7 prior.
• UK Manufacturing PMI 45.0 vs. 44.3 prior.
• UK Services PMI 49.5 vs. 49.3 prior.
• US Manufacturing PMI 49.5 vs. 49.8 prior.
• US Services PMI 49.9 vs. 50.1 prior.

Wednesday

The
Australian Q3 CPI Y/Y is expected at 5.3% vs. 6.0% prior, while the Q/Q reading
is seen at 1.1% vs. 0.8% prior. The RBA is more likely to focus on the core
measures with the Trimmed Mean CPI Q/Q expected at 1.1% vs. 0.9% prior and
the Y/Y reading seen at 5.0% vs. 5.9% prior, while the Weighted Mean CPI Q/Q
expected at 1.0% vs. 1.0% prior and the Y/Y figure seen at 5.0% vs. 5.5%
prior. The recent RBA Minutes were more
hawkish than expected and suggest that an upside surprise in the CPI data
could raise the chances of another rate hike.

The BoC is
expected to keep interest rates unchanged at 5.0% given the recent miss in the CPI report. In fact, prior
to that, there was a good chance that the BoC could have hiked by 25 bps as
the underlying inflation measures kept on surprising to the upside with wage
growth trending upwards. If the BoC decides to surprise with a rate hike, the
Canadian Dollar is likely to come under pressure after an initial spike.

Thursday

The ECB is
expected to keep the deposit rate unchanged at 4.0% given several dovish
comments from ECB members, the miss in the Eurozone
CPI and the line in the September
Monetary Policy Statement saying that “the GC judges that rates have
reached levels that, maintained for a sufficiently long duration, will make a
substantial contribution to the timely return of inflation to target”.

Last week, the US
Initial Claims beat expectations once again, but Continuing Claims missed for
the second time in a row suggesting that workers are finding it harder to
get another job after being laid off. This week the consensus sees Initial
Claims at 209K vs. 198K prior, while Continuing Claims are expected at 1720K
vs. 1734K prior.

Friday

The Tokyo
CPI is seen as a leading indicator for National CPI, and it’s been
consistently trending downwards, although the Core-Core measure looks
stickier. The consensus sees the Headline CPI Y/Y to tick lower to 2.7% vs.
2.8% prior, while the CPI ex-Fresh Food Y/Y is expected to remain unchanged at
2.5%.

The US PCE
Y/Y is expected to tick lower to 3.4% vs. 3.5% prior, while the M/M reading is
seen at 0.3% vs. 0.4% prior. The Core PCE Y/Y, which is the Fed’s preferred
measure of inflation, is expected at 3.4% vs. 3.5% prior, while the M/M figure
is seen at 0.3% vs. 0.1% prior. This report shouldn’t be market moving
given that it’s unlikely to change the near-term policy outlook and we recently
got the timelier CPI report.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• An convoy of trucks carrying emergency aid has entered into Gaza
• The aid, a consignment of food, water and medical supplies, has arrived while air attacks continue
• The UN and US have warned Hamas from stealing the supplies, that the aid is intended for the Palestinian people: „We have been clear: Hamas must not interfere with the provision of this life-saving assistance“ (US Sec State Blinken)
• A summit in Cairo failed to reach a ceasefire agreement

—

For markets, the impending ground war saw shifts into ‚haven‘ Treasuries at the end of the week, albeit against the persistent UST downtrend.

• Forexlive Americas FX news wrap: Yields turn lower but stocks battered anyway. FX flat

CHF also gained towards the end of last week, hourly candles chart:

No ground war over the weekend should be likely to prompt tentative moves back into non-safe haven assets at the beginning of the new trading week.

This article was written by Eamonn Sheridan at www.forexlive.com.

• MON: Bank of Israel Announcement, EZ Consumer Confidence (Oct), US National Activity Index (Oct)
• TUE: German GfK Consumer Confidence (Nov), EZ/UK/US Flash PMIs
• WED: BoC Announcement, NBH Announcement, Australian CPI (Q3/Sep), German Ifo Survey (Oct)
• THU: ECB Announcement, CBRT Announcement, South Korean GDP Advanced (Q3), US GDP Advanced (Q3)
• FRI: CBR Announcement, Japanese Tokyo CPI (Oct), Australian PPI (Q3), US PCE (Sep)

NOTE: Previews are listed in day order

EZ FLASH PMI (TUE): Expectations are for October manufacturing PMI to rise to 43.7 from 43.4, services to tick lower to 48.6 from 48.7, and lifting the composite at 47.4 vs. prev. 47.2. The prior report saw a modest downtick in the manufacturing component to 43.4 from 43.5, whilst an increase in the services headline to 48.7 from 47.9 was enough to lift the composite metric to 47.2 from 46.7. For the upcoming release, analysts at ING state “while much less relevant than the ECB meeting, it has caused some movement in recent months as weakening economic data from the eurozone has raised concerns over a possible downturn”. The desk adds that “a downbeat reading for the PMI would be negative for euro sentiment as it would increase expectations of a recession”.

UK FLASH PMI (TUE): Expectations are for October’s services PMI to rise to 49.5 from 49.3, with the manufacturing reading seen ticking higher to 44.6 from 44.3. The prior report saw services tick lower to 49.3 from 49.5 and manufacturing advance to 44.3 from 43.0, leaving the composite at 48.5 vs. prev. 48.6. This time around, economists at Oxford Economic expect the data to “signal a further contraction in private sector output”. On manufacturing, the consultancy expects that the slowing in the pace of new orders falling, should provide some respite for the October release. On services, Oxford Economics is less constructive amid lower demand, particularly from abroad. From a policy perspective, a soft release is unlikely to have much bearing on the November meeting given that the MPC already paused last month. However, signs of a more pronounced slowing could see a bringing forward of rate cut expectations in 2024.

BOC ANNOUNCEMENT (WED): The market currently prices in an 80% probability of rates being left unchanged, while the probability for a BoC hike in October diminished to under 20% following Canada’s September inflation data, where CPI cooled by more than the consensus was expecting. Additionally, analysts have become more cautious on the growth outlook after the economy saw a surprise contraction in Q2, and activity has been subdued since, as a result of previous BoC tightening, wildfires/floods and labour market industrial action. There are also growing concerns that higher rates will heap pressure on household mortgage costs. The labour market, however, continues to show resilience, with jobs being added in August and September, and the unemployment rate remaining low. Analysts at ING note that BoC Governor Macklem recently argued that the expected trajectory of inflation is where the central bank is focussed, stressing the importance of inflation expectations and wage growth, and although these can be volatile, they are trending upwards. „Slower-than-expected inflation, a clouded growth outlook and higher bond yields means the BoC is likely to overlook jobs tightness and keep rates on hold,“ ING writes, adding that „there is still all the interest in keeping a higher-for-longer narrative alive, but markets may start to shed some doubts on it.“

AUSTRALIAN CPI (WED): The quarterly metrics for Q3 and monthly metrics for September will be released on Wednesday. September Weighted CPI Y/Y is forecast to tick higher to 5.4% from 5.2%, whilst the Q3 Q/Q rate is expected at 1.1% (prev. 0.8%) and Y/Y at 5.3% (prev. 6.0%). Further on the Quarterly metrics, Weighted Median Q/Q is expected at 1.0% (prev. 1.0%), Y/Y at 5.0% (prev. 5.5%), while the Trimmed Mean Q/Q is seen at 1.1% (prev. 0.9%) and Y/Y at 5.0% (prev. 5.9%). Analysts at Westpac suggest “This month will see a quarterly update of some critical services prices including health” and add that forecasts “have a larger than usual degree of uncertainty due to our uncertainty around what the full impact of the changes to government rebates will mean for childcare prices.” The desk also highlights that last month, although the August print was in line with Westpac forecasts, the analysts were surprised by the smaller-than-expected rise in housing amid softer-than-expected rents. From an RBA standpoint, Governor Bullock is due to speak on Tuesday, a day before the CPI metrics, whilst in her most recent speech, she said she is a bit more worried about the inflation impact from supply shocks and seeing demand slow and per capita consumption declining, and if inflation remains higher than forecast, the RBA will have to respond with policy. The most recent RBA minutes also tilted towards the hawkish side and noted “Further tightening may be required if inflation is more persistent than expected”, while “rising house prices could support consumption and might signal policy is not as tight as assumed.”

ECB ANNOUNCEMENT (THU): Consensus is unanimous in expecting the ECB to stand pat on all three of its key rates with markets virtually signalling a 100% chance of such an outcome. The expectation for unchanged rates has stemmed from the September policy statement, which noted that the GC now judges that rates „have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target“. Since the prior meeting, headline Y/Y CPI cooled to 4.3% in September from 5.2%, whilst the super-core metric fell to 4.5% from 5.3%. Furthermore, the Composite Eurozone PMI for September rose to 47.2 from 46.7, but remained deep in contractionary territory with the accompanying report noting “output volumes across both the manufacturing and service sectors were constrained by deteriorating demand conditions”. In terms of commentary from the Bank, President Lagarde has continued to reiterate that rates are sufficiently restrictive, whilst also noting there is more policy lag in the pipeline from past hikes. Even the hawks on the Governing Council such as Netherlands’ Knot have stated that they are “comfortable” with the current level of interest rates. Furthermore, it is also worth noting that recent increases in Eurozone bond yields will act to tighten financial conditions whilst geopolitical risks in the Middle East have given reason for caution. That being said, as has been the case for other major central banks that have engineered a “pause”, policymakers will likely wish to keep optionality over further rate hikes beyond October, particularly given the recent increase in oil prices. In terms of other policy measures, a couple of policymakers have suggested that an early end to PEPP reinvestments (currently set to run until the end of 2024) should be discussed at the upcoming meeting. However, ING is of the view “the surge in bond yields, combined with new debt sustainability concerns in the eurozone” makes it difficult for the ECB to agree an early conclusion to reinvestments at this stage.

CBRT ANNOUNCEMENT (THU): There are currently no expectations for what the central bank may opt to do at its upcoming meeting. As a reminder, last month the CBRT opted to match market expectations with a 500bps hike to 30%. The Bank said tightening will continue until a significant improvement to the inflation outlook is achieved, while tightening will be further strengthened as much as needed in a timely and gradual manner. The CBRT also said it will continue to simplify, and improve the existing micro and macroprudential framework. The release noted inflation readings were above expectations in July and August. Analysts at CapEco at the time suggested the central bank is “now doing what many investors had hoped they would by raising interest rates sharply and taking a more serious stance against inflation”, and “All of this is helping to maintain investor optimism in the policy shift and keeping Turkey’s sovereign dollar bond spreads near multi-year lows.” CapEco suggested a lot more tightening needs to be delivered, as the desk expects rates to rise to at least 35% by year-end. Meanwhile, the latest CBRT survey upgraded its end-year CPI forecast to 68.01% (Prev. 67.22%) alongside GDP Growth to 4.1% (prev. 3.9%). The USD/TRY level was also revised higher to 30.0453 (prev. 30.1422), while the 12-month CBRT Rate was upped to 37% (prev. 32.44%).

JAPANESE TOKYO CPI (FRI): The Tokyo CPI is seen as a precursor to the nationwide release around two weeks later. Headline CPI is seen cooling to 2.7%, but the “ex-fresh food” metric is seen remaining at 2.5% in October. Analysts at ING suggest that “Tokyo’s CPI inflation is expected to slow mainly due to base effects. Headline inflation could come down to 2.6% YoY in October… However, a monthly comparison would show that the recent pick-up in global commodity prices and the weaker yen could add more upside pressure.” From a BoJ standpoint, Governor Ueda on Friday suggested inflation is likely to narrow the pace of its rise, then re-accelerate, reflecting changes in corporate wages and price-setting behaviour. Recent Bloomberg sources meanwhile noted the BoJ is reportedly mulling raising its FY23 price view closer to 3%, raising its FY24 price view to 2% or above, while the inflation outlook is said to keep FY25 around 1.6%.

US PCE (FRI): Currently, headline PCE is expected to rise 0.3% M/M from the prior 0.4% pace, while the Core is also expected to rise by 0.3%, accelerating from 0.1% previously. September’s headline CPI data rose by a little more than expected (0.4% M/M vs an expected 0.3%), although the core rate of inflation rose in line with expectations, by 0.3% M/M; the Y/Y rate of core inflation slowed to 4.1% from 4.4%. Pantheon Macroeconomics said that this reflected a larger increase in electricity prices, but is unlikely to persist. „The big picture here is that core inflation continues to slow, with the annual rate dipping in September, and the Q3 quarterly annualised gain was only 2.8%.“ Pantheon says the forces are in place for core inflation to fall substantially in H1 2024; using the CPI data as well as September’s PPI report, its economists say a 0.27% M/M increase in September’s core PCE deflator is implied. „Our forecast implies the core PCE rose at mere 2.5% annualised rate in the three months to September, compared to the previous three months, the slowest rate since January 2021 and closing in on the target,“ it writes, adding that „the annual rate will remain elevated, dipping to 3.7% from 3.9% in August, but the Fed will not wait until 2% Y/Y is reached before starting to ease.“ There will also be attention on Personal Income and Consumption to gauge the strength of the consumer, with income seen rising 0.4%, matching the prior month’s pace, while consumption is seen rising 0.3%, easing a touch from 0.4% previously. The data will help gauge Fed expectations, albeit the November decision is largely expected to see rates left unchanged as the Fed proceeds carefully and with markets almost fully pricing this in, currently with a 98% probability. There is a c. 40% probability of another hike by January, a hot report may exacerbate these odds, but a cool report will help with evidence that the Fed is done with rate hikes. Meanwhile, further out the curve the first cut is fully priced in by July, which is somewhat at odds with the Fed’s dot plot and higher for longer messaging.

This article originally appeared on Newsquawk.

This article was written by Newsquawk Analysis at www.forexlive.com.