Mon: PBoC LPR; German Producer Prices (Oct); New Zealand Trade Balance (Oct)
Tue: FOMC Minutes (Nov); RBA Minutes (Nov); NBH Policy Announcement; UK PSNB (Oct); Canadian CPI (Oct)
Wed: UK Autumn Statement; Dutch Elections; US IJC (13 Nov w/e); Durable Goods (Oct); Uni. of Michigan Final (Nov); Australian Flash PMIs (Nov)
Thu: US Thanksgiving (Market Holiday); Riksbank & SARB Policy Announcements; ECB Minutes (Oct); EZ & UK Flash PMIs (Nov); Japanese CPI (Oct)
Fri: US post-Thanksgiving (early-closures); UK GfK (Nov); Japanese Jibun Flash PMIs (Nov); German GDP Detailed (Q3); Swedish PPI (Oct); German Ifo (Nov); US Flash PMIs (Nov)
Note: Previews are listed in day order
PBoC LPR (Mon): The PBoC is likely to maintain its benchmark Loan Prime Rates at current levels next week, with the 1-year LPR at 3.45% and 5-year LPR at 4.20%. Expectations for the PBoC to refrain from any adjustments to the LPRs, which most loans and mortgages are based on, follow the central bank’s recent decision to keep the 1-Year MLF rate unchanged at 2.50% as this serves as a fairly accurate precursor for the intentions for the benchmark rates, although its MLF operation did result in the largest net injection in 7 years. Recent data releases from China have been mixed with disappointing Manufacturing PMIs and weaker Exports offset by a surprise expansion in Imports and stronger-than-expected activity data, while property investment and house prices continued to slide which suggests future policy action cannot be ruled out and local press reports have also noted expectations of another RRR cut before year-end.
New Zealand Trade Balance (Mon): There are currently no expectations for the data. In September, exports saw an overall drop of 18% Y/Y to NZD 4.9bln, with major declines in milk powder, butter, and cheese exports. September saw a significant decrease in exports to China by some 20% Y/Y. Other declines included exports to Australia, the US (-6.7% Y/Y), the EU (-26% Y/Y), and Japan (-12% Y/Y). Imports saw an overall decrease of 15% Y/Y to NZD 7.2bln, with a reduction in imports from China (-17% Y/Y), the EU (-1.5% YoY), Australia (-21% Y/Y), and South Korea (-16% Y/Y), although imports from the US increased by 6.1% Y/Y, according to the NZ Stats Bureau. Analysts at Westpac forecast the M/M Trade Balance deficit to print at NZD 1.8bln (prev. NZD 2.329bln) as the bank expects waning effects from the earlier weakness in dairy prices, which the bank says led to a wider deficit.
FOMC Minutes (Tue): At its November policy meeting, the FOMC left rates unchanged at 5.25-5.50%, in line with both expectations and market pricing, and its statement saw only slight changes. The central bank maintained that “additional policy firming that may be appropriate” and made a slight upgrade to its description of economic growth, highlighting that economic activity had been expanding at a “strong” pace in Q3, in contrast to the “solid” pace mentioned in September. It also acknowledged that job gains had “moderated since earlier in the year” (compared to the previous “slowed in recent months” language), but it continued to emphasize the strength of job growth and the low unemployment rate. Further, it included a new line to address the rise in Treasury yields ahead of the meeting, stating that tighter financial and credit conditions are likely to have a negative impact on economic activity, hiring, and inflation, in contrast to the September statement, which only acknowledged tighter credit conditions. Chair Powell’s post-meeting remarks echoed his previous recent views and outlined the Fed’s commitment to maintaining a restrictive monetary policy. He noted that the full effects of this policy were not yet clear. He described the economy as strong, paying attention to robust growth and labor demand. Powell stressed that inflation remains high, and tight labor markets have shown some signs of wage growth easing. In the Q&A, he expressed uncertainty about policy and financial conditions, hinting at potential interest rate hikes. He also suggested that the Fed is close to the end of the current rate-hike cycle and was evaluating its approach. Powell confirmed that rate cuts are not being considered, but the focus is on how long to maintain a restrictive policy. In the wake of the FOMC meeting, nonfarm payrolls, CPI data and some survey releases (such as ISMs) saw downward surprises, resulting in traders pulling back bets on further rate hikes, and adding to bets for rate cuts in 2024 – 100bps of easing is now priced by the end of next year. Fed Chair Powell, speaking around a week after the FOMC meeting, struck a hawkish tone, and said that although progress had been made on inflation, there was still a “long way to go”; he reiterated that officials were not confident that they have achieved a sufficiently restrictive policy stance, adding that if it became appropriate to tighten policy further, the FOMC would not hesitate to do so, stating that the Fed will continue to move carefully, and decide on a meeting-by-meeting basis.
RBA Minutes (Tue): The RBA will release minutes from the November 7th meeting next week and participants will be eyeing any further insight after the central bank hiked the Cash Rate by 25bps, as expected to 4.35% from 4.10%, but tweaked forward guidance in which it noted that whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon data and the evolving assessment of risks. This was seen to be less hawkish than the RBA’s prior language that some further tightening of monetary policy may be required, while it reiterated that returning inflation to target within a reasonable timeframe remains the Board’s priority and it is resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome. The central bank also stated that inflation in Australia has passed its peak, but is still too high and proving more persistent than expected a few months ago, with CPI inflation now expected to be around 3.5% by the end of 2024 and at the top of the 2-3% target range by the end of 2025. Furthermore, the RBA’s quarterly Statement on Monetary Policy released a few days after the rate decision noted they considered the option to continue holding policy rates steady, but decided a hike would provide more assurance on inflation and reiterated a data-dependent approach, while it also acknowledged data over the recent months indicate the domestic economy has been a bit stronger than previously thought and there are both upside and downside risks to the outlook for inflation as it remains high and is forecast to decline more gradually than anticipated three months ago.
Canadian CPI (Tue): Currently, there are no expectations available for next week’s inflation data. Nonetheless, the BoC’s recent meeting minutes noted that current policy settings should be enough to bring inflation back to the 2% target level, provided rates are maintained at the current 5.00% level for a long enough time. The lack of downward momentum in underlying inflation caused considerable concern among BoC policymakers, who felt that this could either mean monetary policy needed more time to work, or that it is not restrictive enough. Members agreed that overall, inflationary risks had increased, given the higher near-term forecast for inflation and persistent core inflation, as well as risks of higher oil prices. They added that persistence in core inflation, elevated inflation expectations and wage growth, as well as atypical pricing behavior, could indicate that higher inflation was becoming entrenched. And finally, on near-term inflation expectations, officials noted that although they remain elevated, they have been easing, while longer-term inflation expectations remain well-anchored.
UK Autumn Statement (Wed): Chancellor Hunt is unlikely to make any meaningful alterations to fiscal policy as it remains around 12 months until a UK election is likely to occur (the latest possible date is January 2025) and he will want to keep his limited powder dry. As such, any pre-election adjustments could be seen in a Mar’24 Budget or theoretically as late as the Autumn 2024 statement if the election occurs in early-2025. On the March update, Morgan Stanley expects in the region of GBP 15bln fiscal easing to occur around this period which will be focused on tax reductions aimed primarily at higher-income individuals e.g. abolishing inheritance tax (projected by the IFS to cost the Treasury GBP 7bln/year if scrapped). Specifically, the Gilt…
