Key Events: Cooler Consumption Ahead?

Key Events

G10

In the US, these are the key data prints:

1. Personal income, spending and PCE – Friday. No surprise on core PCE, Powell has already told us that the Fed expects 2.8% YoY. Consensus forecasts on spending and income imply no real increase, which aligns with my expectations of slower consumption growth in Q4.
2. GDP second estimate – Thursday. Consumption could get revised down as the initial estimate displayed unusual spending patterns.

In the Eurozone and UK, the main events will be:

1. EZ prelim. CPI – Friday. Consensus expects +2.3% YoY in headline and +2.8% in core. Our bottom-up model predicts +2.2% headline, +2.8% core and +3.9% in services. We see strong risks core and services keeps reflecting 2023 patterns and that inflation rebounds above target.

Elsewhere in G10:

1. Japan Services PPI – Monday. The BoJ will be watching the ‘high labour share’ component of the services PPI for signs of higher wage growth being passed through via price increases.
2. New Zealand Q3 Retail Sales – Monday. Real retail sales are expected to contract -0.5% through the third quarter. However, core card sales point to improvement ahead.
3. Australia October CPI Indicator – Wednesday. CPI is likely to deflate MoM through October, though the RBA care little about headline volatility. They want to consider the next two quarters of trimmed mean inflation.
4. ANZ Business Survey – Thursday. We expect demand to continue to rebound.
5. Swiss GDP and KOF Indicator – Friday. The economy is expected to expand +0.4% through the third quarter. However, we believe continued negative reads will come from major surveys (KOF Indicator and the UBS Survey).
6. Canada Monthly GDP – Friday. We expect a rebound in October to 1.5% annualised on the back off stronger auto demand.

EM

1. Poland real economy data – Tuesday / Wednesday. October readings for IP, employment, retail sales and wages will allow a gauge of whether the Polish economy is continuing to lose momentum.

Central Banks in Action

1. Fed minutes – Wednesday. In line with recent comments from FOMC members the minutes are likely to convey that a December cut is not a done deal
2. RBNZ to cut 50bps – Wednesday. We expect the RBNZ to cut the OCR to 4.25% from 4.75%. However, it will be whether they considered a 75bp or 25bp cut that will be more important to markets.
3. PBoC on hold – Monday. After kept 7-day OMO rate unchanged this month, the PBoC will very likely keep the 1-year MLF rate unchanged at 2% next week.

BOK on hold – Thursday. KRW weakness is likely to prevent another rate cut this month despite an increase weak economy.

1. ECB speakers – through the week. We expect comments to push back against a December cut, which the market is increasingly pricing after weak November PMIs.

Markets to Watch

• NZD/USD and AUD/NZD are likely to be impacted by the Australia CPI and RBNZ. With a dollar spike on Friday, we outlined three possible routes that could see us close long NZD/USD, though we hold for now. We added to our short AUD/NZD trade.
• Watch ECB pricing (ERZ5). With a December cut priced at 50%, we think it is stretched. We are short ERZ5.
• We remain bearish French OATs on political uncertainty. However, if PM Barnier can pass something before year-end without the government collapsing, OAT could outperform periphery.

.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)