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Week Ahead Market Brief: November 2 -6

Good morning, and happy Halloween. Currency and government bond markets are holding steady after a week in which monetary and fiscal policymakers largely delivered on expectations: the Bank of Canada raised rates; the Federal Reserve, the European Central Bank and the Bank of Japan all held; and in Britain, Chancellor Healey delivered a well-telegraphed, fiscally moderate Budget that kept investors onside with Andy Burnham’s government. Most major currency pairs look largely range-bound, with measures of expected volatility remaining remarkably subdued – including at the one-week horizon – suggesting that participants expect more of the same over the coming days. The...

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ECB keeps tightening expectations aloft

The European Central Bank left rates unchanged as expected this morning, but the accompanying communications helped investors calibrate policy expectations for the year ahead. The statement itself was fairly anodyne. Officials reiterated that they were not committed to any particular rate path and would continue to take a data-dependent, meeting-by-meeting approach. They acknowledged that a larger and longer-lasting energy shock, together with its indirect and second-round effects, was likely to push inflation higher and growth lower. But they also said that “underlying inflation has remained broadly stable so far and wages do not show a material response at this stage”,...

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US growth accelerates but remains narrow, leaving monetary policy expectations almost unchanged

The world’s biggest economy grew more than expected in the third quarter, lifted by resilient consumer spending and soaring business investment, largely driven by the artificial intelligence buildout. Inflation-adjusted US gross domestic product increased an annualised 3.4% pace in the three months ending in September after rising 2.2% in the prior quarter, according to an initial estimate published by the Bureau of Economic Analysis. Forecasters surveyed by Bloomberg had, on average, expected the economy to grow at a 3.2% rate. Real final sales to private domestic purchasers—a widely-watched measure of underlying demand—advanced 4.9%, up from 4.6% in the previous quarter....

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Australian CPI jolt & RBNZ shock

• Central banks. US equities ticked up. No change by US Fed. USD a bit weaker. Bank of Canada lifts rates. RBNZ surprised by holding steady. NZD tumbled.• CPI & RBA. Australian Q3 inflation firmer than expected. Odds of another RBA hike next week rise. AUD extends its upswing. Will the RBA deliver? Global Trends Central bank meetings and shifts in interest rate expectations have been in focus over the past 24hrs. On balance, the tone across markets has remained positive. US equities edged up again (S&P500 +0.3%), the US yield curve flattened a little as 2yr rates dipped (-4bps...

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Will inflation force the RBA’s hand?

• Upbeat tone. Tech stocks recovered more ground. Bond yields tread water. NZD consolidated while AUD ticked up & outperformed on the crosses.• Data flow. AU Q3 CPI due today & RBNZ expected to hike. US Fed meets tomorrow morning. UK Budget tonight. Bursts of FX volatility possible. Global Trends Risk sentiment remained positive overnight. Tech stocks extended their recovery ahead of key earnings announcements from several megacap stocks (NASDAQ +1.2%). Focus for investors will be on the outlook/level of AI-related spending and when/if the investment might pay off down the track. Elsewhere, oil prices eased a little (brent crude...

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