GDP data from the Eurozone and the UK, employment data from the UK and Australia as well as economic activity data from China will highlight the week ahead of us. US government shutdown is the longest in history going 40 days. There were rumors about reopening over the weekend but it is unclear whether we will get government sponsored data planned for this week (CPI and retail sales).
USD
ISM manufacturing PMI declined to 48.7 in October from 49.1 in September while markets were expecting an improvement to 49.5. A drop in production index, fell into contraction, pulled the overall index into contraction. New orders and employment indices are still in contraction but this month they declined at a slower pace, while prices paid component dropped from low 60s to high 50s, Tariffs are causing increased costs in some sectors of manufacturing but even with these tariffs it is cheaper for companies to import parts than to buy them from American companies.
ADP employment number for the month of October came in at 42k vs 28k as expected. Additionally, September number was revised up to show 29k job losses instead of 32k job losses as preliminary reported. Details of report show that 33k jobs were added in the services sector while manufacturing added remaining 9k jobs. US Challenger jobs data showed that companies announced 153k job cuts last month which is a staggering 175% increase from a year ago. Final number can be lower as these are just announced job cuts, not executed job cuts.
ISM services PMI jumped to 52.4 in October from 50 in September and smashed expectations of a 50.8 print. The report shows improvement in new orders and business activity with latter moving back to expansion and former moving deeper into expansion territory. Employment index also improved but still stays in contraction. Prices paid component disappointed again as it rose to 70 which represents a new three-year high. With inflation pressures persisting there is no need for Fed to cut in December which puts them on a collision course with Trump.
The yield on a 10y Treasury started the week at 4.08%, rose to 4.16% and finished the week at around 4.11%. The yield on 2y Treasury started the week at 3.58%, rose to 3.64% and finished the week at around 3.55%. Spread between 2y and 10y Treasuries started the week at 51bp and finished the week at 56bp. FedWatchTool sees the probability of a 25bp rate cut at December meeting around 65%, while probability of a no cut is around 35%. Bitcoin dropped below $100k during the week but then moved above it by the week end.
EUR
Final manufacturing PMI from Eurozone for the month of October was unchanged at 50. The report shows output increasing slightly while new orders were unchanged. Weak demand is not only hampering growth in new orders but is also speeding up the pace of job cuts as employment index falls at a faster pace. Final services PMI was revised up to 53 from 52.6 as preliminary reported, reaching new 17-month high, as Spanish and Italian readings beat expectations and moved further into expansion while German and French readings get also revised higher. The report shows that demand picked up as seen by rising new orders while input costs continued to ease thus dampening inflation pressures. Composite was revised to a new 29-month high of 52.5.
This week we will have second estimate of Q3 GDP.
Important news for EUR:
Friday:
GDP
GBP
October final manufacturing PMI ticked up to 49.7 from 49.6 as preliminary reported and shows a big bounce from 46.2 seen in September. In the report we can see that output increased for the first time in 2025 while new orders and new export orders slowed down the pace of declines. Still, there are concerns that this jump can be a one-off and that reading could drop in November. Final services was revised higher and now prints 52.3, up from 50.8 in September. Companies are increasing output and new orders are on the rise while employment index declined at the slowest pace since October of last year. Input costs have declined but are still elevated and output prices increased at the slowest pace since June. Composite was lifted to 52.2 from 50.1 the previous month.
BoE has left bank rate unchanged at 4% as was expected but there was a change in vote. Current vote was 5-4, very close, with Breeden, Ramsden, Dhingra, Taylor voted for 25bp rate cut. Voting at previous meeting was 7-2. Members assessed that inflation has peaked and disinflation process continues. Risks are now balanced and pace of further cuts will depend on the inflation outlook. Inflation remains the focal point as the statement says “The extent of further reductions will therefore depend on the evolution of the outlook for inflation”. New projections see the unemployment rate at 5% in 2025/26. Inflation is expected to be lower in 2025 than projected in August and then end the year 2026 at 2.5% while GDP is expected to rise modestly in the medium-term.
BoE governor Bailey clarified that bank will likely continue threading down their gradual rate cutting path. He rationalised his vote for no change by saying “Rather than cutting Bank Rate now, I would prefer to wait and see if the durability in disinflation is confirmed in upcoming economic developments this year”. Chancellor of the Exchequer Reeves opened the door for more personal tax hikes in the upcoming budget.
Important news for GBP:
Tuesday:
Payrolls Change
Unemployment Rate
Thursday:
GDP
AUD
RBA has left its cash rate unchanged at 3.6% as was widely expected. Rising inflation pressures and heightened uncertainty around economic outlook were cited as the main reasons for the decision. Inflation has picked up and was materially higher than expected. Labor market conditions remain “a little tight”. RBA sees that in these conditions it is “appropriate to remain cautious”. They remain data-dependent.
New projections see trimmed mean inflation, core inflation, revised higher and it is now expected to average 3.2% through mid-2026, easing to 2.7% by December of 2026 and 2.6% by the end of 2027. Headline inflation is seen reaching the high of 3.7% in June of 2026 and then returning into the 2-3% targeted range by late 2027. Projections see GDP growing by 2% in 2025 and 2027 and 1.9% in 2026. The unemployment rate is expected to stay stable at 4.4% through the end of 2027. Given these projections the cash rate is seen at 3.6% by the end of 2025, at 3.4% by mid-2026 and at 3.3% by the end of 2026 and 2027.
Governor Bullock stated at the press conference that there was no discussion about cutting rates or raising rates. She was ambiguous stating that there are no more rate cuts but it is also possible that there will be some more. She clarified that they are targeting 2.5% on inflation, mid-point of their 2-3% target, rather than just below 3%. RBA does not provide forward guidance and they will continue with meeting-by-meeting approach as they believe they are close to neutral on rates.
China RatingDog manufacturing PMI, former Caixin, eased to 50.6 from 51.2 in September. The report shows softness in new orders and output which is attributed to the tariff pressures and slower global demand. Due to the sharp drop in new export orders companies were forced to lower the output prices. Input costs have increased and with falling output prices it will further squeeze profit margins. One positive from the report is that employment index increased for the first time since March. Services PMI also eased printing 52.6 vs 52.9 in September. The report shows that domestic demand supported growth but the drop in new export orders indicating weak global demand caused the index to decline. Employment showed further declines and the pace quickened. Same as in manufacturing sector input costs increased while output prices declined hurting profit margins. October trade balance saw surplus declining to $90.07bn as exports posted first negative reading since February of 2024.
This week we will have employment data from Australia as well as industrial production and retail sales data from China.
Important news for AUD:
Thursday:
Employment Change
Unemployment Rate
Friday:
Industrial Production (China)
Retail Sales (China)
NZD
Q3 employment report saw flat employment change for the quarter while the unemployment rate ticked up to 5.3% as was expected. Participation rate declined to 70.3% from 70.5% in Q2 while wages rose 0.5% q/q and 2.1% y/y as was expected. Softening of labour market continues. RBNZ financial stability review warned that financial risks remain heightened as trade tensions and ongoing uncertainties continue to present risks. Defaults on loans have picked up but banks remain well positioned to manage both loan situation and current uncertainty.
CAD
Federal government has announced a new budget which will see larger budget deficits and increase in debt-to-GDP ratio over the coming years. Projected deficit for 2025/26 is almost double that of what was expected in December of 2024. Debt-to-GDP ratio is expected to reach highest point of 43.3% in 2027/28. Growth projections have been lowered and now GDP is seen at 1.1% in 2025 vs 1.7% previously, 1.2% in 2026 vs 2.1 previously and around 2% for period of 2027-28. One positive is that total borrowing needs will ease. The budget plans a CAD280bn in investments over five years targeting infrastructure, defense, housing, and competitiveness measures.
October employment report saw economy add 66.6k jobs vs losing 2.5k jobs as expected. This marks second month in a row of 60k+ jobs added. The unemployment rate dropped to 6.9% from 7.1% in September and participation rate ticked up to 65.3% to add to this great report. Wages rose 4% y/y after rising 3.6% y/y the previous month. Weakness can be found in composition of jobs as all of the jobs added were part-time jobs 85.1k while full-time jobs declined by 18.5k. BoC has signaled they will hold rates at the current level and if positive data continues to come from the labor market that pause can be longer than expected.
JPY
Final manufacturing PMI in the month of October ticked down to 48.2 from 48.3 as preliminary reported and marked lowest reading since February of 2024. We can see from the report that manufacturing was hit hard by the slowing global demand as both new orders and new export orders declined at a faster pace. Demand weakness was concentrated in automative and semiconductor sectors. Input costs continued to rise but they were coupled with increases in output prices which will in turn push inflation higher. Despite of all the gloom in report manufacturing companies grew a bit optimistic about the future as they expect stabilization in the global trade. Final services reading was revised up to 53.1 from 52.4 as preliminary reported but still a decline from 53.3 seen in September. New orders grew at their slowest pace in 16 months while both input costs and output prices rose more quickly showing more inflation pressures building. Composite was also revised up and it now stands at 51.5, up from 51.3 the previous month.
September saw wages increase 1.8% y/y in nominal terms but drop 1.4% y/y in real terms making it ninth consecutive month of falling real wages. BoJ governor Ueda emphasized importance of strong wages for determining when to resume with hiking rates. Household spending rose in September by 1.8% y/y less than 2.5% y/y increase as expected and down from 2.3% y/y in August.
CHF
September inflation report showed prices declining further with headline print at 0.1% y/y vs 0.3% y/y as expected and down from 0.2% y/y in August. Monthly figure declined by 0.3%. Core inflation printed 0.5% y/y, down from 0.7% y/y the previous month. SNB projects inflation to average 0.4% in fourth quarter and chairman Schlegel reiterated that stance. SNB policymaker Tschudin stated that rates are where they should be and that negative rates will be used only when necessary.
