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Majors settle into ranges ahead of data-intensive week

Ahead of a week in which hard data will take precedence over central bank jawboning, equity indices are slightly softer, oil prices are holding firm, Treasury yields are flat, and all major currencies look firmly rangebound.

Foreign exchange markets continue to ignore signs of dysfunction in the US political system: The dollar remains unbowed after the ratings firm Moody’s lowered its outlook on US debt to “negative” from “stable”, putting it on course toward joining Standard & Poor’s and Fitch in downgrading the country’s sovereign credit rating. And with newly-minted Speaker Mike Johnson’s can-kicking bill likely to face a vote in the House tomorrow, volatility term structures look relatively unperturbed around Friday’s government funding deadline.

The British pound is edging up after Rishi Sunak sacked interior minister Suella Braverman – surprising no one – and appointed former Prime Minister David Cameron as foreign minister – surprising everyone. Although the cabinet shuffle itself shouldn’t have economic or foreign exchange implications, markets are pleased to see Chancellor of the Exchequer Jeremy Hunt maintaining his position, and some position-squaring is likely underway ahead of this week’s domestic employment and inflation data.

Today’s North American calendar is bare: The US will release its monthly budget statement, and Federal Reserve Governor Lisa Cook will make introductory comments at a machine learning conference.

Hawks could gain some lift out of tomorrow’s consumer inflation report, with price growth likely to remain well above the Fed’s target range, potentially helping bolster the perceived case for a final rate hike in this cycle. We doubt a single print will meaningfully impact the central bank’s policy trajectory however, and will focus more closely on Wednesday’s retail sales numbers, along with Thursday’s earnings report from Walmart. If the almighty American consumer is finally beginning to roll over, the consequences – for the economy, policy, and exchange rates – could be profound.


Experimental numbers from the Office for National Statistics should show British wage growth slipping slightly in the three months to September, bolstering the Bank of England’s confidence in its monetary tightening efforts. Markets expect average ex-bonus weekly earnings to slip toward 7.7 percent in the period, down from 7.8 percent, combining with lower vacancies, slower job growth, and higher unemployment claims to indicate a broad-based slackening in labour market conditions. (02:00 EDT)

On a headline basis, US inflation probably kept decelerating in October, with falling gasoline prices pointing toward a sub-3.3-percent year-over-year print, down from 3.7 percent in September. But the core measure – which strips out highly-volatile food and energy components – may remain stubbornly strong, holding at 4.1 percent as medical cost adjustments and vehicle prices stay sticky, keeping the Fed on alert. (08:30 EDT)

The Japanese economy likely turned in a lacklustre performance in the third quarter, with weak consumer spending and a downward lurch in net exports seen dragging it into a -0.9-percent annualized contraction. With US consumers poised to retrench and Chinese demand suffering under a housing-led slowdown, further softness is likely in the fourth quarter, helping convince us that the Bank of Japan is unlikely to move decisively out of negative rates territory anytime soon. (19:00 EDT)


Markets think British inflation likely fell to a two-year low in October, helping set the stage for an eventual reversal in the Bank of England’s policy settings. Headline consumer prices are seen rising 4.8 percent year-over-year in the month, down sharply from 6.7 percent in September as household energy bills plummeted and softness emerged in the food, tangible goods, and services segments. The core measure might see less deceleration, printing closer to 6.7 percent after topping 6.9 percent in the prior month, but market participants and central bankers are united in the understanding that this is likely to subside more slowly over time. (02:00 EDT)

US retail sales likely tumbled in October, with declining vehicle volumes and a drop in gasoline prices helping pull the headline print down to -0.3 percent – or lower. Control group sales—which exclude vehicles, gas, food, and building materials—probably turned in a slightly better performance, edging higher on a month-over-month basis, but should also exhibit signs of strain as earnings growth slows, pandemic era savings are depleted, and consumers turn more cautious. That said, we’ve been repeatedly surprised by the strength of US household demand, and upside shocks are possible. (08:30 EDT)

Chinese industrial production, fixed asset investment, and retail sales numbers should combine to paint a picture of an economy that began bottoming out in October, but generally one that is generally failing to show decisive signs of improvement. Year-over-year comparables should stay strongly positive, given 2022’s zero-covid distortions, but underlying momentum clearly remains weak: recent survey data suggests that factories are still slowing, taking a toll on business investment, while a years-long downturn in the property sector hits consumer spending.

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