Week of November 27

The somewhat truncated trading week was dominated by the release of FOMC minutes, which weren't as dovish as hoped, and the UK Autumn Statement, which left markets ambivalent. Inflation is likely to be the dominant theme for the coming week, with the Eurozone and US reporting their latest figures ahead of the release of final PMIs as investors assess the upcoming monetary policy cycle.

Top Events in Review

The minutes from the FOMC were more hawkish than anticipated, with members still agreeing that rates needed to remain high for an extended period, denting hopes of a cut in the first half of the year. The dour mood was compounded by weak guidance from several retailers ahead of Black Friday. The University of Michigan confidence survey confirmed that inflation expectations for the coming year were higher. 

The UK released its Autumn Statement, including some minor tax cuts offset by not revising tax brackets, with the pound getting more support after flash composite PMI returned to expansion. Above $1.2450, the pair remains biased up.

Inflation in Japan rose, but factory orders declined and manufacturing PMI disappointed. ¥148.66 appears to be forming solid support for USDJPY for now.

The surprise ruling by the German Constitutional Court that wouldn't allow the government to repurpose €60B in covid funds to green investments left the administration in disarray, with speculation that the governing coalition could collapse amongst talk of lifting the debt brake. 

OPEC+ delayed its monthly meeting, with press reports indicating some members wanted to raise their production quotas. WTI remained in consolidation, forming an inside bar on the weekly chart.

Israel and Hamas reached a deal for a temporary ceasefire to allow the return of some hostages, in a move that some in the market see as a de-escalation of the conflict in the Middle East. Regardless, gold ended its second week of gains but failed to reclaim $2K.

Biggest Market Movers

• Positive momentum ahead of the holidays allowed US indices to reach new highs. All three majors rose around 1% to mark their fourth week of consecutive gains.
• WTI swung substantially, falling below $74.00/bbl at one point before recovering amidst speculation about potential production increases by OPEC and ample build in inventories.
• Gold popped above $2,000/oz in the wake of the FOMC minutes but failed to hold on to the gains and was below the key figure by the end of the week.

Top Events in the Week Ahead

Inflation Indicators in Focus 

Preliminary November CPI change for the shared economy starts on Wednesday, when Germany is expected to report a slowing pace to 3.7% from 3.8% prior. But for the Euro Area, headline inflation is expected to tick up to 3.1% from 2.9% prior. This is also expected to be reflected in the core rate moving up to 4.3% from 4.2% in October, even as the economy is contracting following the dismal flash PMIs released last Thursday.

A few hours later, the US reports the October Core PCE price index, which is closely followed by the Fed and is expected to remain at 0.3%. At the same time, US personal spending is expected to report a slowing of growth to 0.4% from 0.7% prior, despite personal income remaining unchanged at 0.3%. 

EURUSD faces stiff resistance at the 200-week SMA of $1.0945, with only a catalyst increasing chances of surpassing the barrier towards $1.10. $1.085 will remain a critical support level to keep an eye on.

PMIs and Economic Outlook

Chinese growth (or lack thereof) will take centre stage by releasing official and private PMI figures towards the end of the week. The NBS Manufacturing PMI is expected to come just a hair of crossing back into expansion at 49.9, up from 49.5 prior. The private Caixin measure, including smaller companies, is expected to achieve a return to expansion at 50.2, up from 49.5 prior. Aussie might react to the data, with a likely attempt at 0.66 seen unless the figures point to disappointment, exposing 0.65 instead.

Following the disappointing flash measure in Europe, the Euro Area final PMI figure will be scrutinised in hopes of an upward revision to French figures, which might raise the 43.8 preliminary reading for the shared economy. 

Meanwhile, the UK is expected to confirm its return of composite PMI to expansion. US ISM manufacturing PMI is seen sliding further into contraction at 46.5, down from 46.7 prior. 

Retail Sales All More Important 

Investors are likely to be interested in the release of Black Friday and Cyber Monday sales figures to gauge the resilience of consumers for holiday spending that could buoy markets through the rest of the year. 

The US Conference Board will issue its consumer confidence survey, which is expected to remain optimistic at 102.1 but declining from 102.6 prior. Japan's retail sales are expected to slow down, a further sign that the recent economic growth might be transitory.

Other Events, Earnings

Monday sees the release of US new home sales. German consumer confidence comes out on Tuesday. Wednesday has UK money supply and mortgage lending along with US inventory figures. Canada will also report that its Q3 GDP stagnated on Wednesday. The UK Nationwide house price index and Swiss retail sales are on the docket for Thursday. Canadian jobs numbers will come out too, with the unemployment rate expected to tick up to 5.8% from 5.7% prior. The RBNZ is expected to hold rates steady again and affirm the higher-for-longer narrative. Japanese employment data is expected on Friday. 

Companies reporting earnings through the week include Intuit, CrowdStrike, Salesforce, Dollar Tree, Dell Technologies, and Kroger.