UPCOMING
EVENTS:
- Monday: Eurozone Retail Sales. (China on holiday)
- Tuesday: Japan Average Cash Earnings, RBA Meeting Minutes,
US NFIB Small Business Optimism Index. - Wednesday: RBNZ Policy Decision, FOMC Meeting Minutes.
- Thursday: Japan PPI, ECB Meeting Minutes, US CPI, US
Jobless Claims, New Zealand Manufacturing PMI. - Friday: UK GDP, Canada Labour Market report, US PPI, US
University of Michigan Consumer Sentiment, BoC Business Outlook Survey.
Tuesday
The Japanese
Average Cash Earnings Y/Y is expected at 3.1% vs. 3.6% prior. Wage growth has
turned positive lately in Japan and that’s something the BoJ always wanted to
see to meet their inflation target sustainably. The data shouldn’t change much for the
central bank for now as they want to wait some more to assess the developments
in prices and financial markets following the August rout.
Japan Average Cash Earnings YoY
Wednesday
The RBNZ is
expected to cut the OCR by 50 bps and bring it to 4.75%. The reason for such
expectations come from the unemployment rate being at the highest level in 3
years, the core inflation rate being inside the target range and high frequency
data continuing to show weakness. Moreover, Governor Orr in the last press
conference said that they considered a range of moves in the last policy
decision and that included a 50 bps cut.
RBNZ
Thursday
The US CPI Y/Y is
expected at 2.3% vs. 2.5% prior, while the M/M figure is seen at 0.1% vs. 0.2%
prior. The Core CPI Y/Y is expected at 3.2% vs. 3.2% prior, while the M/M
reading is seen at 0.2% vs. 0.3% prior.
The last US labour
market report came out much better than expected and the market’s pricing for a
50 bps cut in November evaporated quickly. The market is now finally in line
with the Fed’s projection of 50 bps of easing by year-end.
Fed’s Waller
mentioned that they could go faster on rate cuts if the labour market data
worsened, or if the inflation data continued to come in softer than everybody
expected. He also added that a fresh pickup in inflation could also cause the
Fed to pause its cutting.
Given the recent
NFP report, even if the CPI misses slightly, I don’t think they would consider
a 50 bps cut in November anyway. That could be a debate for the December
meeting if inflation data continues to come below expectations.
US Core CPI YoY
The US Jobless
Claims continues to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.
Initial Claims
remain inside the 200K-260K range created since 2022, while Continuing Claims
after rising sustainably during the summer improved considerably in the last
weeks.
This week Initial
Claims are expected at 230K vs. 225K prior, while there’s no consensus for
Continuing Claims at the time of writing although the prior release showed a
decrease to 1826K.
US Jobless Claims
Friday
The Canadian
Labour Market report is expected to show 28K jobs added in September vs. 22.1K
in August and the Unemployment Rate to increase to 6.7% vs. 6.6% prior. The
market is pricing an 83% probability for a 25 bps cut at the upcoming meeting
but since inflation continues to surprise to the downside, a weak report will
likely raise the chances for a 50 bps cut.
Canada Unemployment Rate
The US PPI Y/Y is
expected at 1.6% vs. 1.7% prior, while the M/M figures is seen at 0.1% vs. 0.2%
prior. The Core PPI Y/Y is expected at 2.7% vs. 2.4% prior, while the M/M
reading is seen at 0.2% vs. 0.3% prior.
Again, the data is
unlikely to get the Fed to debate a 50 bps cut at the November meeting even if
it misses. The risk now is for inflation to get stuck at a higher level or even surprise to the upside.
US Core PPI YoY