Key Events: US Elections – A Republican Sweep?

Key Events

G10

In the US, there is…

1. Elections – Tuesday. Prediction markets see a Republican sweep as the most likely outcome, which consensus views as bad for inflation but good for growth. The surprise would be a Republican sweep followed by macroeconomic stability, though we will not know the policy directions of the incoming administration for some time.

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

1. Final PMIs – Monday and Wednesday. Are not that important at this stage, surveys have been overly bearish of late and there is little expectation for a change vs preliminary.
2. ECB speakers – Monday and Wednesday. Hawks Nagel and Holzmann are likely to further push back on the market getting ahead of itself in pricing cuts. Escriva, de Guindos and Lagarde will be interesting to hear from with regards to how they perceive the recent hawkish data outturns.

Elsewhere in G10:

1. Swiss unemployment – Tuesday. We see upside risks to the unemployment rate versus market expectations for it to remain unchanged.
2. New Zealand labour market – Tuesday. We believe the labour market is doing better than expected.

EM

1. Korea CPI – Tuesday. October inflation likely eased to 1.4%, with core inflation at 1.9%. BoK expected to pause rate cuts in November.
2. Philippines CPI – Tuesday. Inflation likely rose to 2.4% in October, within the central bank’s target, supporting continued easing amid stable core prices.
3. China trade – Thursday. October trade likely shows sluggish export growth, declining imports, and limited impact from recent stimulus amid weak demand.
4. Thailand CPI – Wednesday. Inflation likely rose to 1.0% in October, driven by fuel base effects and tourism recovery; demand may rise with government support.

Central Banks in Action

1. Fed to cut 25bp – Wednesday. The Fed is reactive to the data that is roughly in line with the SEP. While inflation is becoming sticky this will not be fully apparent until next year.
2. BoE to cut 25bp – Wednesday. The MPR will also be updated. In the near-term, it will likely need to become more dovish given inflation misses, but what will be more important is how the MPC perceive the impact of the Autumn budget. If they do not see it as substantially raising the risk of an inflation overshoot, then it could open the door for relative UK rates outperformance. Otherwise, it paves the way for continued UK rates underperformance.
3. RBA on hold – Tuesday. Rates are widely expected to remain unchanged. We expect the inflation forecast to be revised lower, though with little change in forward guidance.
4. Norges on hold – Thursday. Norges will keep forward guidance unchanged with forecasts likely to suggest a first cut in March.
5. BCB to hike 50bps – Wednesday. 50bps hike is widely expected and priced. We expect BCB to sound more hawkish but maintain guidance to be data dependent.
6. NBP on hold – Wednesday. CPI at 5% and recent zloty weakness could mean an end to the NBP’s more dovish rhetoric.
7. BNM to hold at 3% – Wednesday. BNM considers rates to be at neutral level. CPI is just below 2% YoY, but has upside risks due to fuel subsidy cuts. We expect BNM to stay comfortably on hold for some time.
8. CNB to cut – Thursday. Core inflation below the CNB forecast should allow another cautious 25bp rate cut.

Markets to Watch

• USD could rally this week if Trump secures a second term.
• EUR bearish positions remain extremely bearish. However, an unwind of these trades is unlikely in the near-term with a Trump victory remaining somewhat likely.
• AUD/NZD prospects remain bearish. We expect dovish revisions to RBA inflation forecasts to weigh on the pair.

(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.)