Inflation data from the US, the UK and Canada coupled with preliminary October PMI data from the Eurozone and the UK as well as economic activity data from China will highlight the week ahead of us. US government shutdown enters fourth week and the fourth plenum in China with the discussion about new, 15th, five-year plan for period of 2026-2030.
USD
Treasury Secretary Bessent confirmed that Trump – Xi meeting in South Korea in two weeks is still on track and presidential advisor confirmed that Trump will be in South Korea October 29-30. EU has talked about partnering with US on tackling China’s rare earth bans. As Foreign Minister of Denmark put it, EU and US together can put pressure on China to play fair. Trump has kinda downplayed situation with China commenting that it will be fine with China. Powell Tuesday, warned about downside risks to labor market and added that it would be enough for an October cut. He hinted at a possible rollback of QT.
IMF raised forecast for world GDP in 2025 to 3.2% from 3% previously while sticking with their previous prediction for a 3.1% growth in 2026. US, Eurozone, Japan, India and Mexico growth have been revised higher, China was left unchanged while Canada and Argentina saw their growth revised down for both years. Brazil growth is expected to be stronger than forecast in 2025, but weaker than forecast in 2026.
Fed’s Beige Book shows that weakness in the US economy continues. The report shows 3 of 12 Fed districts reporting slight to modest growth, 5 reporting no change and 4 reporting a slight softening. On the employment front 11 of 12 Fed districts reported flat while 1 reported “modest decline”. Regarding prices, all 12 Fed districts saw “moderate or modest” price growth. Anecdotal data from the Beige Book point to both October and December cuts.
The yield on a 10y Treasury started the week at 4.%, rose to 4.07%, dipped below 4% during the week and finished the week at around 4.02%. The yield on 2y Treasury started the week at 3.47%, rose to 3.52% and finished the week at around 3.46%. Spread between 2y and 10y Treasuries started the week at 53bp and finished the week at 56bp. FedWatchTool sees the probability of a 25bp rate cut at October meeting around 99%, while probability of a 50bp cut is around 1%. Gold has reached new all time high as it crossed the $4200 level, while silver continue to make a new all time high as it crossed $54.
This week we will have inflation report expected to show 3% y/y in both headline and core readings.
Important news for USD:
Friday:
CPI
EUR
Over the weekend new French government has been formed by President Macron. Lecornu will remain as Prime Minister while Roland Lescure was reappointed as Finance Minister. Main goal of new government will be to end political crisis. PM has reiterated the need for restoring country’s public finances. New government is facing imminent pressure to get a Budget passed. During the week PM Lecornu managed to convince members of Socialist Party to join in as he pledged to delay pension reform.
Final Eurozone CPI saw headline unchanged at 2.2% y/y while core reading was revised up to 2.4%. German, French and Italian readings were unchanged at 2.4% y/y, 1.2% y/y and 1.6% y/y respectively while Spanish reading printed 3% y/y increase vs 2.9% y/y as preliminary reported.
This week we will have preliminary October PMI numbers expected to slow down a bit.
Important news for EUR:
Friday:
Manufacturing PMI (Eurozone, Germany, France)
Services PMI (Eurozone, Germany, France)
Composite PMI (Eurozone, Germany, France)
GBP
BoE policymaker Megan Greene stated that economic activity is stronger than thought of a year ago but that inflation and wages are also stronger. She is worried that disinflationary process is slowing down as core inflation has gone nowhere for the past year. Additionally, she characterized monetary policy as less restrictive and stated that rates are still on a downward path. BoE Chief Economist Pill stated that more gradual approach to removing monetary restriction may be appropriate as inflation may prove more sticky.
Payrolls change for the month of September reported 10k jobs losses while August reading was revised up and showed increase of 10k jobs. ILO unemployment rate for the month of August ticked up to 4.8% with wages also increasing and printing 5% 3m/y for average weekly earnings and 4.7% 3m/y for ex bonus category. It was a mixed report, we could see that labor market continues to soften but no clear conclusion could be made, but the increase in the unemployment rate raised chances of a December cut.
August GDP came in at 0.1% m/m as expected but July reading was revised down to show a decline of 0.1% m/m. Manufacturing and industrial production improved 0.7% m/m and 0.4% m/m respectively, services index was flat while construction output declined 0.3% m/m.
This week we will have inflation data, expected to print 4% y/y as well as preliminary October PMI numbers which are expected to show an improvement.
Important news for GBP:
Wednesday:
CPI
Friday:
Manufacturing PMI
Services PMI
Composite PMI
AUD
Minutes from the RBA October meeting showed members agreeing that there is no need for another rate cut and reiterated data-driven and cautious approach due to sticky services inflation and tight labor market. They feel that monetary policy remains little restrictive as full impact of past cuts is yet to be felt. They see recovery in household consumption as likely to persist but preach caution due to rising uncertainties caused by US tariffs and development of Chinese economy.
RBA Assistant Governor Hauser warned that Q3 inflation is likely to come higher than forecast as recent data came in hotter than expected. She added that employment growth slowed more than expected but that labour market might be tighter than assumed. She clarified that policy is set on a 1-2 year horizon and added that estimates for where neutral rate is are very wide. Governor Bullock stated that weakness in the job markets could open door for further cuts and hinted that neutral rate sits at 3%.
September jobs report was an ugly one. Economy did add 14.9k jobs but the unemployment rate jumped to 4.5%, nearly a four-year high, from upwardly revised 4.3% in August while expectations were for it to stay at 4.3%. Additionally, number of job losses the previous month has been revised up giving this report another bleak data. Participation rate also went up (67% vs 66.8% the previous month). Economy added 6.2k full-time jobs and 8.7k part-time jobs. Increase in participation rate will take some sting out of the surge in the unemployment rate, but it will not be enough as markets are now pricing around 70% chance of a rate cut in November. This just gives more importance to the Q3 inflation report that will be published on October 29.
Chinese September trade data show a surplus of $90.45bn vs $98.96bn as expected and down from $102.33bn in August. Imports have surged 7.4% y/y, a 17-month high, led by iron ore, copper and soybeans, followed by very strong coal imports. Imports from US declined by 16.1% y/y while imports from EU, Japan, South Korea and Latin America saw increases. Exports continued to increase as well and printed 8.3% y/y, the strongest growth in the past six months. As was the case with imports, exports to the US plunged 27% y/y but they were supplanted by increases in exports to EU, ASEAN, Latin America and Africa. Rare earth exports have plunged 31%.
September CPI saw another month of deflation as it printed -0.3% y/y vs -0.2% y/y as expected, but smaller decline compared to -0.4% y/y print in August. Food prices have been the main culprit for deflation as they dropped 4.4% y/y. PPI prices printed -2.3% y/y vs -2.9% y/y the previous month thus making it full three years (36 consecutive months) of falling prices. Weak consumer confidence and industrial overcapacity are exerting negative pressure on prices, pushing them down and creating deflation. This all opens room for further monetary easing. During the week PBoC has set USDCNY fix below 7.1.
This week we will have Q3 GDP and economic activity data from China.
Important news for AUD:
Monday:
GDP (China)
Industrial Production (China)
Retail Sales (China)
NZD
September electronic card retail sales data, covering about 70% of total retail sales, printed -0.5% m/m after a 0.6% m/m increase in August. Consumer finished Q3 on a weak note. RBNZ will ease mortgage restrictions from December 1 in an attempt to boost the housing market as the move is intended to make mortgages more accessible to first-home buyers. RBNZ Chief Economist Conway stated that 2.5% rate is at lower end of neutral range and added that 50bp rate cut was a finely balanced decision due to the fact that inflation is at the upper band of their targeted range. Additionally, he is open to further cuts in the coming months but it will depend on the incoming data as they remain data-dependent.
CAD
BoC governor Macklem hinted at another rate cut for October meeting by saying that they are putting more emphasis on downside risks and warned that growth will be below potential. He highlighted a lot of surrounding uncertainties that are preventing bank from being purely forward looking. CAD had an abysmal week with USDCAD staying safely above 1.40 level and EURCAD hitting new all time highs on Thursday and then giving back some of it on Friday.
This week we will have September inflation data expected to show further increases.
Important news for CAD:
Tuesday:
CPI
JPY
Komeito has decided to withdraw from coalition with ruling LDP party thus increasing political uncertainty and opening room for opposition parties to form a new government. LDP and Nippon Ishin are entering into second round of talks to enter into a coalition. BoJ member Tamura, voted for rate hike at the September meeting, did not make any comments on JPY levels and did not commit to voting for rate hike at next meeting. He stated that monetary policy needs adjustment so the rate moves closer to the neutral and warned that weak JPY could lead to further upward price pressures.
CHF
SNB total sight deposits for the week ending October 10 came in at CHF474.2bn vs CHF476.9bn the previous week. It is just a small movement as Swissy strength is dictated by the geopolitical events around the world.
