A busy week ahead for investors with highly important data releases to digest and major central banks meetings to follow. The Fed is highly likely to hike rates by 75BP and traders would listen to the Fed’s chairman’s press conference this week for any hints of a change in policy by next year. The bank of England on the other hand could be on the way to hiking rates by 75 bp. Nonetheless, it is important to note that markets await the government budget announcement on November 17 as it will have an important effect on the upcoming central bank’s monetary policy.
Major US indices rallied and closed in the green last week despite disappointing reports from some companies like Amazon and weak results and outlooks from Alphabet, Microsoft, and Meta
investors hoped that the Fed could lower its rate hike speed from the December meeting. On the other hand, the image did not look that bright for the gold price which closed in the red on Friday as the US dollar rebounded higher on better-than-expected GDP data. The Brent oil steadied above $90pb on a better demand outlook from China.
Chicago wheat futures climbed by 6% at the start of this week on Russia’s withdrawal from the Black Sea export agreement
worrying the market over global supplies. The Russian administration suspended its participation in the agreement following a Ukrainian drone attack on its fleet in Crimea.
Economic data highlights
Monday 31st of October
Tuesday 1st of November
- CHF- Retail Sales (SEP)
- EUR- Core Inflation Rate Flash (OCT)
- EUR- GDP Growth Rate Flash (Q3)
- ZAR- Private Sector Credit (SEP)
- ZAR- Balance of Trade (SEP)
Wednesday 2nd of November
- AUD- Manufacturing PMI Final (OCT)
- RBA Interest Rate Decision
- CHF- Manufacturing PMI Final (OCT)
- GBP- Manufacturing PMI Final (OCT)
- CAD- Manufacturing PMI (OCT)
- USD- ISM Manufacturing PMI (OCT)
- ZAR- ABSA Manufacturing PMI (OCT)
- ZAR- Total New Vehicle Sales (OCT)
Thursday 3rd of November
- NZD- Unemployment Rate (Q3)
- EUR- Unemployment Rate (Germany- OCT)
- EUR- Manufacturing PMII Final (OCT)
- USD- ADP Employment Change (OCT)
- Fed Interest Rate Decision & Press Conference
Friday 4th of November
- AUD- Global Services PMI Final (OCT)
- CHF- Inflation Rate (OCT)
- GBP- Services PMI Final (OCT)
- EUR- Unemployment Rate (SEP)
- BoE Interest Rate Decision
- USD - ISM Non-Manufacturing PMI (OCT)
The FED Meeting
- EUR- Services PMI Final (OCT)
- CAD- Unemployment Rate (OCT)
- USD- Non-Farm Payrolls
- USD- Unemployment rate (OCT)
The FOMC could press toward its fourth 75bp rate hike this year given that annual rates of core inflation are shooting higher on one hand, and a strong labor market with more vacancies than the unemployed workforce on the other. The Fed Chairman could renew the central bank’s commitment to bringing inflation levels down to the 2% target and that any rate hike would be data-dependent (mainly NFP and inflation numbers).
Markets expect that the US economy has added in October 200K jobs and that unemployment rates increased from 3.5% in September to 3.6% in October. Therefore, any lower-than-expected unemployment rates could embolden the Fed to keep pushing the US interest rates higher. Investors also will monitor the average hourly earnings rate as any higher-than-expected number means more income for individuals, and more spending leads to higher inflation.
Other Central Banks
The higher-than-expected inflation rates of Q3 released last week at 7.3 could lead the Reserve Bank of Australia (RBA) to go back to its previous rate hike policy and rise interest rates by 50bp, this would come after a rate hike of 25pb at the last meeting in October.
The Bank of England could push the UK interest rates to the vicinity of 3% to control soaring inflation levels
currently at 10.1%
and to send a message to investors of its firm commitment to bringing inflation levels back to the 2% target. However, Rishi Sunak’s government’s fiscal policy which is due to be announced on November 17 will be key to helping the central bank to fulfill this purpose.
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