Key Events: Disruption Ahead!

Key Events

G10

In the US, we have a data-light week ahead:

1. S&P PMIs – Friday. The week’s most important release will be the S&P PMIs. Like most soft data, they have decoupled from the hard data so tell us little about the economy. For a trading perspective on the PMIs, see our Event Monitor.

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

1. UK October CPI – Wednesday. Consensus expects a rise to +2.2% YoY in headline, with a drop to +3.1% in core and to +4.8% in services. The BoE agrees on headline but expects services at +4.9%. Our bottom-up calculation sees upside risk to headline, core in line, and services at +4.7%. Large non-core services re-pricings could knock the number about, so we follow the detail. Market BoE pricing is too hawkish, and a miss vs BoE expectations could drive a move there.
2. EZ October CPI (final) – Tuesday. The details of the release will be important given the outturn beat expectation in the preliminary release.
3. UK October retail sales – Friday. The market expects a paring of the upside surprise in September.
4. Preliminary November PMIs – Friday. We will assess the detail but put limited weight on the survey outturns themselves given how much they have missed the hard data in recent years.

Elsewhere in G10:

1. Canada CPI – Tuesday. The BoC’s preferred measures of inflation (CPI-Trim and CPI-Median) are near target, so inflation data should be less important for the market going forward.
2. Japan CPI – Friday. This will be an important one for the BoJ. October should confirm Tokyo CPI and show a broadening out of price rises following the bi-annual price setting that occurs in October.

EM

1. South Africa inflation – Wednesday. A sharp MoM drop in petrol prices will ensure continued disinflation close to the bottom of the SARB’s target range.
2. Korea 20-day trade – Wednesday. After disappointing October and partial November data, this will be a key gauge of whether global trade growth is rolling over.

Central Banks in Action

1. Chicago Fed president Goolsbee – Thursday. Goolsbee is one of the more high-profile doves and is likely to make the case for a December cut.
2. NBH on hold – Tuesday. FX weakness will outweigh better-than-expected inflation, leaving rates on hold another month.
3. CBRT on hold – Thursday. Upward revision to inflation forecasts and no clarity on the minimum wage hike leaves rate cuts at least a month away.
4. SARB to cut – Thursday. Favourable CPI should offset worries over recent FX weakness and allow another 25bp rate cut.
5. PBoC on hold – Wednesday. After 25bp cuts of 1y and 5y LPR rate in October, the PBoC will very likely keep the rates unchanged this month.
6. BI to hold – Wednesday. BI’s is primarily motivated by maintaining FX stability, and the recent weakness in IDR rules out rate cuts in the near term.

Markets to Watch

• EUR/USD at 1.05 is trading at range lows. We expect slightly more dollar upside this month but are watching three things into yearend as the rally becomes extended. Instead of short EUR/USD, we are short EUR/JPY.
• AUD/NZD remains around where we turned short AUD/NZD. That is despite strong labour market data and hawkish RBA remarks. We remain confident in the trade.
• BoE pricing – right now there is just 60bp of cuts priced over the next 12 months – versus 140bp for the ECB. The CPI print could cause motion on this front. Our lean is towards the BoE cutting at least 75bp over that period.

(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.)