Preliminary November PMI data from Eurozone and the UK combined with inflation data from Canada and meeting minutes from FOMC will highlight the shortened week ahead of us. Please be mindful that on Thursday it is Thanksgiving holiday in the US and there will be early market close on Friday so liquidity in the markets will be thinner.
USD
Headline CPI in October fell to 3.2% y/y from 3.7% y/y in September. It fell more than expected (3.3% y/y). Inflation was flat on the month vs 0.1% m/m as expected. Energy was the biggest contributor to decline falling 2.5% m/m with gasoline prices declining 5% m/m. Core CPI inched lower and printed 4% y/y vs 4.1% the previous month while monthly figure saw a 0.2% increase vs 0.3% as expected. Shelter rose 0.3% m/m compared to 0.6% m/m increase in September. “Supercore”, which encompasses services ex energy and housing costs and to which Fed pays special attention, rose 0.2% m/m and declined to 3.75% y/y. Probability of a December hike plunged to a zero after the report came out and bonds saw increased decline leading to lower yields.
October retail sales came in negative dropping 0.1% m/m while a drop of 0.3% m/m was expected. This is the first drop after six consecutive months of increasing sales. September number was revised up to 0.9% m/m from 0.7% m/m as previously reported. Control group, used for GDP calculation, came in at 0.2% m/m as expected while September number was revised up. Ex autos and ex autos and gas categories both came in at 0.1% m/m.
The yield on a 10y Treasury started the week and year at around 4.64%, rose to 4.67%, then fell below 4.38% post CPI report and finished the week at around 4.45%. The yield on 2y Treasury reached the high of 5.08%. Spread between 2y and 10y Treasuries started the week at -41bp then widened to -42bp as curve inverted further. The 2y10y is has now been inverted for over a year. Post CPI, PPI and retail sales FedWatchTool saw the probability of no change at both December and January meetings at 100%.
This week we will have minutes from the November meeting.
Important news for USD:
Tuesday:
FOMC Minutes
EUR
ECB policymaker Martin Kazaks stated that it will be premature to say that terminal rate has been reached and thus left the possibility of additional rate hikes open. Second Q3 GDP reading saw no changes and came in at -0.1% q/q and 0.1% y/y. Final CPI reading for the month of October was unchanged with headline at 2.9% y/y and core at 4.2% y/y.
European commission has made changes to growth forecast and now sees 2023 GDP at 0.6%, down from 0.8% previously while 2024 GDP is seen at 1.2% and 2025 GDP at 1.6%. Inflation is seen declining and it is expected to print 5.6% in 2023, 3.2% in 2024 and 2.2% in 2025. So they do not see inflation falling to their target before 2026.
German ZEW survey for the month of November saw current conditions basically unchanged at -79.8 vs -79.9 in October, however huge improvements are seen in the outlook category. German outlook jumped to 9.8 from -1.1 in October while increase to 5 was expected. Euro area outlook surged to 13.8 from 2.3 the previous month, also surpassing expectations. Optimism regarding financial conditions are prevailing.
This week we will have preliminary November PMI data.
Important news for EUR:
Thursday:
S&P Global Manufacturing PMI (Eurozone, Germany, France)
S&P Global Services PMI (Eurozone, Germany, France)
S&P Global Composite PMI (Eurozone, Germany, France)
GBP
Payroll change for the month of October saw addition of 33k with previous month’s reading showing huge improvement to 32k from -11k as initially reported. September ILO unemployment rate remained unchanged at 4.2% while earnings posted declines. Average weekly earnings posted 7.9% 3m/y vs 7.4% 3m/y as expected but down from 8.2% 3m/y in August. Ex bonus wages came in at 7.7% 3m/y as expected, down from 7.9% 3m/y the previous month. A drop in wages will be a very welcome sign for BoE as they can remain in pause mode. It is notable though that this report excludes some metrics therefore its validity is compromised and it is questionable how much emphasis will BoE put on in it.
Headline inflation for the month of October fell by more than expected to 4.6% y/y from 6.7% y/y in September. It was flat on the month. Core reading also posted a decline as it printed 5.7 y/y vs 6.1% y/y the previous month. Base effects and drop in energy prices were the main culprit for fall in inflation while encouraging sign can be seen in falling services inflation (6.6% vs 6.9% previously).
This week we will have preliminary November PMI data.
Important news for GBP:
Thursday:
S&P Global Manufacturing PMI
S&P Global Services PMI
S&P Global Composite PMI
AUD
Q3 wage price index rose by 1.3% q/q as expected making it the biggest quarterly gain since this series is tracked (26 years). RBA has clearly incorporated this data into its last week’s decision to hike interest rates to 4.35%. October employment report saw employment change smash expectations and show 55k jobs added vs 20k as expected. The unemployment rate ticked up to 3.7% while participation rate jumped back to s in August (67%), Almost 2/3 of the jobs added were part-time (38k) with full-time printing 17k. The report shows that labor market is not weakening yet.
October activity data for China saw industrial production tick up to 4.6% y/y from 4.5% y/y in September and beat expectations of 4.4% y/y increase. Retail sales posted a big jump rising 7.6% y/y from 5.5% y/y the previous month with expectations of a 7% y/y increase. The report shows that spending on services outweigh goods spending. PBOC has left 1-year MLF rate unchanged at 2.5% but have injected CNY1450bn. This is the largest injection in almost seven years and is clearly intended to stimulate the economy.
NZD
Electronic card retail sales, consisting of almost 70% of total retail sales, fell by 0.7% m/m and 22% y/y in the month of October. Q3 PPI data showed input coming in at 1.2% q/q vs -0.2% q/q in Q2 while output came in at 0.8% q/q vs 0.2% q/q the previous quarter. This report indicates that price pressures are still going strong and even increasing on the producer side. RBNZ will be worried after this report but it will not be enough for them to start hiking rates again.
This week we will have consumption data for Q3.
Important news for NZD:
Thursday:
Retail Sales
CAD
Housing starts in October printed 247.7k vs 252.9k and up from 270.7k in September. Despite higher interest rates which are slowing down housing market, there is still ample demand for housing in Canada and housing starts are printing healthy numbers.
This week we will have inflation data.
Important news for CAD:
Tuesday:
CPI
JPY
Preliminary Q3 GDP reading saw economy contract by 0.5% q/q and 2.1% on annualised basis more than expected (-0.1% q/q and -0.6% annualised). GDP deflator, a measure of inflation, jumped to 5.1% from 3.5% in the previous quarter. Private consumption was flat on the quarter with Q2 reading being revised down. Expectations were for it to increase by 0.2%. Capital expenditure fell for the second consecutive quarter coming in at -0.6% vs 0.3% as expected.
CHF
SNB total sight deposits for the week ending November 10 came in at CHF476.3bn vs CHF474.6bn the previous week. Total sight deposits are still within a two-month range. SNB chairman Jordan reiterated that they will not hesitate to further tighten monetary policy in order to contain inflation if need for that arises. He then proceeded to add that he is unsure if the terminal rate has been reached.
