Week of November 13

The main theme for the week was central bank speakers, as some officials from the ECB and BOE at least mentioned rate cuts, even though their respective bosses quickly pushed back on the possibility. US inflation is likely to be the star of the coming week, with price data from the UK contributing to further debate on the future of monetary policy.

Top Events in Review

No single event was the catalyst for last week's trading, but it seemed markets were responsive to a rolling series of commentary from central bankers, with the surprise being that some board members were willing to at least mention rate cuts sometime in the future. 

ECB's Yannis Stournaras (Greece) was among the first, mentioning that a rate cut would be possible by the end of the year, though unsurprisingly, he got pushback from his German colleague Joachim Nagel who said it was too early to talk about rate cuts. 

A similar exchange happened across the English Channel, but at a higher level when BOE Chief Economist Huw Pill mentioned rate cuts next year, with BOE Governor Andrew Bailey countering that it was too early a day later. 

Low uptake of US treasury auctions also was on investors' radar as worries that the market could be seeing liquidity tightening as the Treasury tries to fund obligations in the lead-up to a possible shutdown in Congress can't pass another continuing resolution. Reverse repos held at the Fed fell below $1T for the first time since mid-2021. 

Fed Chair Jerome Powell's more hawkish comments suggested rate hikes were still in the cards. And BOJ Governor Kuroda laid out conditions for exiting ultra-easing in a step seen as part of a prolonged move towards policy normalisation. 

Chinese exports fell faster than expected, while imports grew instead of the decrease expected, leading to a large drop in the trade surplus.

Biggest Market Movers

• WTI fell some 5% after API and Chinese trade data suggested weaker demand, hitting a July low.
• The pound faded its large gains from the prior week as guilts rose ahead of data expected to show slow economic growth, sending GBPUSD over 1% down.
• Gold tracked more than 2% lower through the week on rhetoric from Fed officials perceived as more hawkish. Now, 1930 comes into the spotlight.
• The yen weakened towards 152 even as BOJ's Ueda presented conditions for exiting ultra-easing as investors considered the exit timeline longer than anticipated.

Top Events in the Week Ahead

US Inflation in Focus Following Hawkish Powell

October's CPI will be the most significant piece of economic data for the week ahead. Concerns about central bank policy have eased generally, but Powell's remarks at the end of the week have weighed on sentiment, with the US CPI release assessing whether further progress has been made in combating inflation. The headline is expected to fall to 0.1% month-on-month and the annual rate to 3.3% from 3.7%, while the Core is forecast to remain unchanged. The US Index may continue its upward leg towards 106.50 should bulls reclaim 106. 105 remains major support to keep an eye on.

A UK Trove of Critical Data for BOE Policy

The UK is set to release a wave of economic data, including employment, inflation, and retail sales data. PMI and recruitment surveys suggested employment conditions continued to soften in October. Wages are expected to fall dramatically to 7.2% from 8.1%, likely to guide expectations for inflation ahead of Wednesday's report. Official UK employment data will be released on Tuesday, although there are ongoing concerns about data quality. 

Inflation expectations are that the annual CPI rate will fall significantly to 4.9% from 6.7%, with Core also slowing down from 6.1% to 5.8%. Retail sales will be released at the end of the week, which are expected to show continued weakening of the UK consumer in the face of high costs, with headline monthly retail sales expected to slide -0.4% compared to -0.9% prior.

7275 appears as the next support in Footise, depending on the course of action through the week. On the flip side, 7500 seems to be resistance requiring force to break.

Eurozone and Japan GDP to Shed Light into Economies' State

Both the Eurozone and Japan are slated to release third-quarter GDP updates, providing insights into potential recession. In Europe, the EA expects to confirm the flash reading showing a contraction of 0.1% in its second estimate, down from 0.2%, likely confirming the possibility of a technical recession in the second half if Q4 also comes in negative. EURUSD failed to get past 1.07 but also managed to stay above 1.065.

In the Asia-Pacific region, the third quarter GDP from Japan will be under scrutiny after growth was shown to have peaked earlier in the second quarter and further moderated at the start of the fourth, partly due to slower demand from China. USDJPY could soar to multiyear highs of reverse gains on a potential double-top, exposing 150 once again.

Other events, earnings

Australia NAB and Westpac Confidence Indies come out on Tuesday. Wednesday sees the Australian wage price index as well as Chinese retail sales. Thursday has Japan machinery orders. For Friday, US building permits are expected. 

Earnings season will be winding down through the week, but there are still some major names set to report, including Tyson Foods, Home Depot, Tencent Music, Cisco Systems, TJX, Target, Walmart, Alibaba, Applied Materials and Spectrum Brands.