NFP along with Canadian jobs data, ISM PMI coupled with Australia GDP and Swiss inflation will highlight the first week of the last month in 2024.
USD
Scott Bessent is the new Treasury Secretary. He is a hedge fund manager with a long track record on Wall Street and has worked previously with George Soros. He is seen as a “fiscal hawk” and wants to reduce government spending. Additionally, he does not favour Trump’s stance on tariffs, as he is more in favour of gradual approach. In his op ed in he stated a “3-3-3” policy of 3% GDP growth, 3% budget deficit of GDP by 2028 and 3 million barrels per day increase in US oil production.
US President Trump tweeted that his decision from day one would be to increase tariffs of 25% on Mexico and Canada in order to keep US borders secure and stop the inflow of illegal immigrants. China was threatened with additional 10% tariffs for not doing its job in fighting off Fentanyl inflows. Currencies of these three countries were pummeled lower. Second reading of Q2 GDP reaffirmed advanced print of 2,8% annualized.
The yield on a 10y Treasury started the week at 4.41%, rose to 4.47% and finished the week at around 4.18%. The yield on 2y Treasury started the week at 4.39% and reached the high of 4.39%. Spread between 2y and 10y Treasuries started the week at 1bp, inverted for a short period on Monday and finished the week at 5bp as curve steepened further. The 2y10y was inverted for over two years. FedWatchTool sees the probability of a 25bp rate cut at December meeting at around 55%, while probability of a no cut is around 45%. Bitcoin has breached $99 000 as the aggressive move up after Trump won his second term continued.
This week we will have ISM PMI data as well as NFP on Friday. Headline number is expected to come at around 190k with the unemployment rate staying at 4.1%.
Important news for USD:
Monday:
ISM Manufacturing PMI
Wednesday:
ISM Services PMI
Friday:
NFP
Unemployment rate
EUR
ECB Chief Economist Lane stated that monetary policy should not remain restrictive for too long and warned about thinking that job on inflation is finished as services prices need to come down. He emphasized that they will continue making their decisions on a meeting-by-meeting basis and added that if there are no geopolitical or political escalations large part of bringing inflation to 2% target will be completed in 2025.
ECB Executive Board member Schnabel, well-known hawk, warned that cutting rates by too much would use very valuable policy space that was built over the last couple years. She sees limited room for rate cuts and warns that she needs to see services inflation coming down. Additionally, she is cautions claiming that road to inflation reaching 2% target in 2025 may prove to be bumpy. According to if data continues to develop as projected they may gradually lower rates towards neutral rate adding that ECB is not so far from the neutral rate.
Preliminary CPI data for the month of November saw headline number pick up and print 2.3% y/y as expected and up from 2% in October. Base effects with energy prices were the main culprit as monthly reading printed a deflationary –0.3%. On the other hand and much more encouraging for the ECB, core CPI remained at 2.7% y/y. Both German and French readings showed increases in prices as ECB projected at their November meeting.
GBP
BoE Deputy Governor Lombardelli gave almost the same answers as ECB’s Lane stating that it is too early to declare victory on inflation with services inflation being this high adding that she is in favor of gradual removal of monetary policy restrictions. She also stated that there was a great deal done on disinflation but outlook for wages and services inflation remains uncertain, therefore that remains their focus. She sees risks around inflation as broadly balanced and laments that BoE is hampered by the low quality of labor market data. Additionally, she wants to see more evidence of cooling price pressures before opting for another rate cut.
AUD
Monthly inflation data for October came in at 2.1% y/y, unchanged from September while an increase to 2.3% y/y was expected. This dataset is heavily influenced by government subsidies for electricity consumption and if we would subtract that inflation would be much higher, around 3.5%, same as core print. Additionally, this dataset does not include all of the products from inflation basket, therefore quarterly reading is much more precise and RBA follows it more closely.
PBoC has left the 1-year MLF unchanged at 2% as was widely expected and injected additional CNY900bn of liquidity. Official PMI data for the month of November saw manufacturing improve to 50.3 from 50.1 in October while services sector declined to the borderline 50 after a 50.2 print the previous month. Composite held at 50.8, unchanged from October reading.
This week we will have Q3 GDP data.
Important news for AUD:
Wednesday:
GDP
NZD
RBNZ has delivered a 50bp rate cut as was widely expected bringing the rate to 4.25%. The statement shows that inflation is close to targeted 1-3% range. “If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.” Economic activity is subdued and with economy running in excess capacity it is pushing inflation down. “Economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending.“ The statement concludes with “The MPC emphasized that maintaining inflation near the midpoint of the target band ensures flexibility to address future inflationary shocks.”
RBNZ Governor Orr stated at the press conference that projections are consistent with a 50bp cut in February and added that there was very little discussion regarding 75bp or 25bp rate cut at this meeting. Additionally, he added that neutral rate is between 2.5 to 3.5% and expects bank to reach those levels by the end of 2025. This is a dovish sounding statement and should keep NZD subdued. Q3 retail sales showed another decline but smaller than expected (-0.1% q/q vs -0.5% q/q as expected). On the yearly level retail sales declined by 2.5%.
CAD
Q3 GDP reading from Canada showed annualized growth of 1%, down from 2.1% in Q2. Quarterly growth was 0.3%, down from 0.5% in the previous quarter. Digging deeper into the details of the report we find some positive and some negative information. On the positive side we have household consumption which rose 0.9%. On the negative side we have the fact that government spending rose 1.1% this quarter attributing great majority to the growth. Additionally, GDP per capita was negative and has been declining for the sixth quarter in a row.
This week we will have employment data.
Important news for CAD:
Friday:
Employment Change
Unemployment rate
JPY
PPI in October jumped to 2.9% y/y from 2.6% y/y in September. November CPI data for the Tokyo area saw headline number jump to 2.6% y/y from 1.8% y/y in October. Ex fresh food component rose to 2.2% y/y after 1.8% y/y print the previous month while ex fresh food, energy, “core-core”, ticked up to 1.9% y/y from 1.8% y/y in November. Mounting price pressures increase chances of a BoJ hike at their December meeting. USDJPY has traded below the 150 level for a period on Friday.
CHF
SNB total sight deposits for the week ending November 22 came in at CHF459.4bn vs CHF463.4bn the previous week. A small decline, but still in a well-established range that gets tighter and in the last few months is around 26bn. Q3 GDP data showed economy expanding by 0.4% q/q and 2% y/y. There were negative revisions to the Q2 reading.
This week we will have inflation data.
Important news for CHF:
Tuesday:
CPI
