The markets’ focus will be on the European Central Bank meeting this week. Investors expect another jumbo rate hike of 75bp despite the looming economic crisis in the Eurozone, as the ECB officials remain committed to bringing inflation to the 2% target. investors will keep an eye on the Bank of Japan and the Bank of Canada meetings taking place this week as well.
There are lots of important figures for the US and other major economies this week. The US GDP of Q3 is likely to show a positive number for the first time this year after experiencing a “technical” recession in the previous two quarters, the market expects that the US economy has grown by 2.1% in the third. However, the core personal consumer expenditure data (the Fed’s favorite tool to measure inflation) is expected to rise from 4.9% to 5.2%. This could lead the Fed to keep its tight monetary policy unchanged and deliver its fourth 75bp rate hike in November.
The conservative party in the UK has kick-started a fast-track contest to appoint a new leader, candidates must secure the support of 100 MPs to get through the next stage. The former Chancellor of the Exchequer Mr. Rishi Sunak has a comfortable backing of 147 MPs, the Cabinet Minister Penny Mordaunt remained with only 24 MPs supporting her candidacy, while Boris Johnson pulled out of the leadership race, saying: “it would simply not be the right thing to do”.
The US indices and the Gold rallied on Friday as some sellers took profit by the end of the week. The greenback index closed in the red while the oil price stabilized on expectations of more demand from China.
Economic data highlights
Monday 24th of October
Tuesday 25th of October
- AUD-S&P Global Manufacturing & Services PMI Flash (OCT)
- CNH- GDP Growth Rate (Q3)
- CNH- Industrial Production (SEP)
- EUR- S&P Global Manufacturing & Services PMI Flash (OCT)
- GBP- S&P Global/CIPS Manufacturing & Services PMI Flash (OCT)
- USD- S&P Global/CIPS Manufacturing & Services PMI Flash (OCT)
Wednesday 26th of October
- EUR - Ifo Business Climate (Germany- OCT)
- Treasury Secretary Janet Yellen Speech
- USD- House Price Index (AUG)
- USD- Consumer Confidence (OCT)
Thursday 27th of October
- AUD- Inflation Rate (Q3)
- JPY- Leading Economic Index Final (AUG)
- BoC Interest Rate Decision & press conference
- USD-New Home Sales (SEP)
Friday 28th of October
- EUR- GfK Consumer Confidence (Germany- NOV)
- ECB Interest Rate Decision & press conference
- USD- Durable Goods Orders (SEP)
- USD- GDP (Q3)
- USD - PCE Prices (Q3)
The ECB Meeting
- JPY- Inflation Rate (OCT)
- AUD- Producers Price Index (Q3)
- BoJ Interest Rate Decision
- EUR- GDP and Inflation Rate (Germany – Oct)
- USD- Core PCE Price Index (Sep)
- CAD- GDP (AUG)
- USD- Michigan Consumer Sentiment (Oct)
The ECBs’ hawks have a strong argument to press toward another jumbo 75 bp rate hike in November’s meeting given the inflation levels in the Eurozone are far away from their 2% target (9.9% in September).
On the other hand, markets would like to find out more about whether the ECB would follow the Feds’ steps and start talking about a quantitative tightening process ie, shrinking nearly 5 trillion euros of bonds accumulated during recent crises.
Bank Of Canada
The Upside inflation level direction in Canada keeps the pressure on the Central bank to hike interest rates further. Therefore, it is highly likely to see the BoC hiking by 75 Bp taking Canadian interest rates to their highest in nearly 12 years at 4.0%.
Bank of Japan
Governor Kuroda could warn that the recent currency depreciation would have a negative effect on the economy however, it is expected that the Bank of Japan to keep its current policy unchanged. It is noteworthy to mention that the USD/JPY hit last week a multi-decade high and broke above 150.00 threshold.
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