Week Ahead Preview 14th of November

Investors’ attention will shift to the UK this week, as markets brace for the first fiscal statement of Mr. Sunak’s government. It is still unclear how the budget deficit would be reduced, although, we know that Chancellor of Exchequer Mr. Hunt pledged to reverse almost all tax measures announced in the old mini-budget and hinted at hiking inheritance tax and spending cuts. The UK economy already suffers a double-digit inflation rate mainly caused by the previous monetary and fiscal policies. Therefore, this budget will directly influence the Bank of England’s upcoming decisions as more spending cuts will be massively helpful in reducing inflation levels and as a result would decrease the need for big interest rate hikes.  
 
On the other side of the pond, the US inflation numbers of October released last week provided a big relief to the market as the CPI headline dropped from 8.2% in September to 7.7%in October, while the core CPI fell from 6.6% (Sep) to 6.3% (Oct). This data increased the odds that the Fed would slow down its rate hiking pace and move towards increasing only 50bp in December instead of 75bp, and hike the rate between 25-50bp in (Q1-23) instead of 50-75 bp. Moreover, the October Consumer Price Index reads opened the door for expectations that the US central bank could reverse its current policy in the second half of 2023.
 
The downside surprise in the CPI numbers triggered a US Dollar selloff, the dollar index fell by over 4% and then closed in the red on Friday, while most US major indices and bonds rallied and closed in the green. Commodities such as gold and silver also edged higher due to the US dollar weakness and rallied between 4% and 5%, while the oil price ended the week in the red due to prospects of lower demand from China caused by maintaining the zero covid policy. 
 
   
Economic data highlights 
 
Monday 14^th of November 
 

• CHF- Producers Price Index (OCT)
• EUR- Industrial Production (SEP)
• OPEC Monthly Report
• BOC Gov Macklem’s speech
• SNB Chairman Jordan’s speech

 
Tuesday 15^th of November 
 

• JPY- GDP Growth Rate (Q3)
• Fed Williams speech
• RBA Meeting Minutes
• CNY- Industrial Production (OCT)
• CNY- Retail Sales (OCT)
• GBP- Unemployment Rate (SEP)
• EUR- GDP Growth Rate (Q3)
• EUR- ZEW Economic Sentiment Index (NOV)
• USD- PPI MoM (OCT)

 
Wednesday 16^th of November  
 

• CNY- House Price Index (OCT)
• GBP- Inflation Rate (OCT)
• CAD- Inflation Rate (OCT)
• USD- Retail Sales (OCT)
• US Crude Oil Inventories
• USD- Industrial Production (OCT)
• ZAR- Retail Sales (SEP)

 
Thursday 17^th of November 
 

• AUD- Unemployment Rate (OCT)
• UK Fiscal Statement
• EUR- Inflation Rate Final (OCT)
• USD- Building Permit (OCT)
• Fed Member Bullard’s speech
• Fed Member Bowman’s speech
• Fed Member Mester’s speech

 
Friday 18^th of November  
 

• JPY- Inflation Rate (OCT)
• GBP- Retail Sales (OCT)
• ECB President Lagarde’s speech
• CHF- Industrial Production (Q3)
• USD- CB Leading Index MoM (OCT)

 
 
Inflation Rates
 
 
The UK inflation headline rate is unlikely to fall given the rise in the oil prices in October (nearly by 7%) therefore, markets expect to see an increase in the Consumer Price Index from 10.1% in September to 10.6% in October.
 
The Canadian inflation read may follow its UK counterpart’s steps and rise from 6% to 6.3%. Nonetheless, any higher-than-expected data could increase pressures on the Bank of Canada to tighten its policy further, especially after the surprising rate hike delivered in its last meeting (50bp instead of 75bp).