Week of November 25

Markets had a rocky week as UK inflation beat expectations, Euro Area PMIs disappointed, and Japan's inflation came in hotter than forecast.

Next week, the focus shifts to the FOMC minutes release, the Euro Area Flash CPI, China's official PMI and US Durable Goods orders.​

Week in Review

Last week saw a limited economic calendar, allowing markets to digest the end of the earnings season and escalation of geopolitical tensions.

Flash PMIs from Europe were in focus, declining from 46 expected to 45.2 to mark the 29th consecutive month of contraction. PMIs also fell in both France and Germany. Unexpectedly, the services sector also entered contraction for the first time since January, with uncertainty surrounding tariffs following the election of Donald Trump cited as a factor in rising pessimism. ECB President Christine Lagarde referenced the lack of economic growth in the shared economy on two occasions. EUR/USD continued to fall for a third week, opening the door to 1.02.

Japanese inflation came in above the target but remained largely as expected after BOJ Governor Kazuo Ueda said Monday that interest rates would continue to rise. Meanwhile, UK inflation rose to 2.3% from 1.7% previously and 2.1% expected, while retail sales declined faster than expected, leading analysts to speculate that the British economy was heading towards stagflation, which would force the BOE to keep higher interest rates.Cable still declined, marking the 8th consecutive week in red, with eyes on 1.2350 next.

The RBA minutes confirmed that the bank does not expect interest rates to return to the target level until 2026, with no "immediate need" to adjust policy. Aussie tested 1.65 after seven weeks of losses, but the recovery risks failing while trading below 0.6440. A break lower would bring 0.64 in focus, with a move past 0.6550 expected to target 0.66.

On the geopolitical front, reports suggested that Russia indicated a willingness to make concessions in Ukraine to secure a peace deal that would largely freeze the conflict along the current front. Simultaneously, the country amended its nuclear doctrine to respond to the use of conventional weapons following Biden's authorisation for Kyiv to employ long-range missiles supplied by the US. Gold could extend its gains to new records above $2800 per ounce, leaving behind support at $2625.

Reportedly, US President-Elect Donald Trump will appoint Kevin Warsh as Treasury Secretary and, after that, as Chair of the Fed when the term of current Chair Jerome Powell expires.

Japanese politicians reached an agreement on a stimulus spending package, ending a weeks-long impasse. Also in Japan, machine tool orders surged by 48.7%, which was perceived as Chinese firms stockpiling ahead of potential US-led tariffs.​

Biggest Market Movers

• Gold soared over 5% as tensions escalated in the ongoing conflict in Ukraine, increasing concerns over the potential use of nuclear weapons.
• The yen rose against other currencies, with USD/JPY also declining following remarks from Ueda that the central bank remained data-driven.
• Kiwi underperformed despite an increase in PPI mid-week, as disappointing PMI weighed on the currency.
• EUR/USD fell around 2% throughout the week to a 2-year low as markets priced in the likelihood of additional rate cuts, particularly after the release of disappointing PMI.​

Top Events in the Week Ahead

The upcoming week will be relatively quiet. Markets will take a break on Thursday due to the Thanksgiving holidays, followed by limited trading on Friday. Before the holiday, the market will be keen to observe the minutes from the last FOMC meeting.

FOMC Mins to Shed Light on Policy Direction

The last FOMC meeting occurred in the immediate aftermath of the US election. As the potential final rate cut of the year featured in the Fed's "dot-plot" matrix in September, investors will be keen to see any changes in policymaking perspective. Dow could extend gains towards 45000 past record highs unless bulls lose the 43000 handle.

On Wednesday, US Durable Goods orders are also expected to show an increase. Additionally, the second reading of US Q3 GDP is scheduled for the same session, with expectations of confirming a muted slowdown in annual growth to 2.8%.

On Friday, Canada will report its own GDP, forecasted to decline to 2% from 2.1% year-on-year. USD/CAD may unglue from recent price action around 1.40. Furthermore, China will release its official NBS PMI figures on Saturday, although markets will not react until December 2nd.​

Europe Grappling with Stagflation Concerns

Following Euro Area flash inflation, Germany is set to release its own inflation figures on Thursday. Price growth is expected to remain steady at 2%, but the harmonised rate is expected to increase to 2.6% from 2.4%. Meanwhile, France's inflation rate is also projected to hold at an annual 1.2%, echoing decelerating growth in the bloc's second-largest economy. However, the overall inflation rate for the Eurozone, due on Friday, is forecast to grow to 2.3% from 2%, with the core rate rising to 3% from 2.7% previously.

Continuing with the inflation theme, Australia is set to report its inflation numbers on Wednesday, with the consensus being that it will remain above target.​

RBNZ Poised to Keep Easing Policy

The RBNZ is expected to continue easing despite recent interest rate cuts as the New Zealand economy remains sluggish and faces the risk of a recession. Inflation, however, remains within the target range. Economists and financial markets forecast another 50 basis point cut at the RBNZ meeting on Wednesday, with a minority suggesting an even larger 75 basis point cut. Market participants expect approximately 175 basis points of easing from the RBNZ throughout the year. If the smaller reduction takes place, Governor Adrian Orr will likely maintain a dovish stance, signalling further easing.​

Other Events and Earnings

This week brings several notable releases and earnings reports. On Monday, the German Ifo Business Climate survey will be published. Tuesday will see the release of the CB Consumer Confidence reading for the US. Wednesday features the German GfK Consumer Confidence survey and US Wholesale Inventories data. Thursday holds the European Economic Sentiment survey. Friday's economic indicators include Japanese Retail Sales and Consumer Confidence figures.

Several well-known companies are slated to report earnings this week, including Analogue Devices, Dell, CrowdStrike, Compass Group, Johnson Matthey, Tullow Oil, and Autodesk.