UPCOMING EVENTS:
- Monday: PBoC LPR.
- Tuesday: Canada PPI.
- Wednesday: BoC Policy Decision.
- Thursday: Australia/Japan/Eurozone/UK/US Flash PMIs, US Jobless Claims.
- Friday: PBoC MLF, Tokyo CPI, German IFO, Canada Retail Sales, US Durable Goods Orders.
Monday
The PBoC is expected to cut the LPR rates by 20 bps bringing the 1-year rate to 3.15% and the 5-year rate to 3.65%. This follows the recent announcement by governor Pan Gongsheng on Friday which aims to achieve a balance between investment and consumption.
He also added that monetary policy framework will be further improved, with a focus on achieving a reasonable rise in prices as a key consideration. China is in a dangerous deflationary spiral and they must do whatever it takes to avoid Japanification.
Wednesday
The Bank of Canada is expected to cut interest rates by 50 bps and bring the policy rate to 3.75%. Such expectations were shaped by governor Macklem mentioning that they could deliver larger cuts in case growth and inflation were to weaken more than expected.
Growth data wasn’t that bad, but inflation continued to miss expectations and the last report sealed the 50 bps cut. Looking ahead, the market expects another 25 bps cut in December (although there are also chances of a larger cut) and then four more 25 bps cuts by the end of 2025.
Thursday
Thursday will be the Flash PMIs Day for many major economies with the Eurozone, UK and US PMIs being the main highlights:
- Eurozone Manufacturing PMI: 45.3 expected vs. 45.0 prior.
- Eurozone Services PMI: 51.6 expected vs. 51.4 prior.
- UK Manufacturing PMI: 51.4 expected vs. 51.5 prior.
- UK Services PMI: 52.4 expected vs. 52.4 prior.
- US Manufacturing PMI: 47.5 expected vs. 47.3 prior.
- US Services PMI: 55.0 expected vs. 55.2 prior.
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 an improvement in the last two months, spiked to the cycle highs in the last couple of weeks due to distortions coming from hurricanes and strikes.
This week Initial Claims are expected at 247K vs. 241K prior, while there’s no consensus for Continuing Claims at the time of writing although the last week we saw an increase to 1867K vs. 1858K prior.
Friday
The Tokyo Core CPI Y/Y is expected at 1.7% vs. 2.0% prior. The Tokyo CPI is seen as a leading indicator for National CPI, so it’s generally more important for the market than the National figure.
The latest news we got from the BoJ is that the central bank is likely to mull changing their view on upside price risks and see prices in line with their view, thus enabling a later hike.
Therefore, a rate hike can come only in 2025 if the data will support such a move.
