Fed, RBA, BoC and SNB meetings will highlight the massive week ahead of us that will also contain final Q3 GDP from Japan, inflation from China and ADP weekly employment data from the US.
USD
ISM manufacturing PMI printed a second consecutive decline in November as reading moved deeper into contraction with 48.2 vs 48.7 in October. Expectations were for it to increase to 49. The report shows that production returned into expansion with 51 but new orders fell deeper into contraction with new export orders improving a bit but still hard in contraction. Employment index crashed further down while prices paid component moved up increasing worries about price pressures. Tariffs are cited as the main drag on the reading increasing costs and reducing demand thus lowering companies profit margins. Additionally, economic and policy uncertainties are also weakening sentiment in the manufacturing sector.
Trump administration has abruptly stopped conducting interviews for the next Fed chair. Markets are seeing this as a sign that current Director of National Economic Council Kevin Hassett will become new Fed Chairman. He is the most dovish candidate and has the closest working relationship with president Trump. Consequences of his election would be weaker USD, steeper yield curve and higher risk assets.
ADP national employment for the month of November saw private sector losing 32k jobs vs adding 10k as markets expected. Prior month was revised up to 47k from 42k as initially reported so that took a bit of sting from the big miss in November. Looking across sectors we see that education added the most jobs (30k) followed by leisure & hospitality (13k). Biggest losses were in professional business services (-26k) and information (-20k) with manufacturing losing 18k jobs which is in odds with Trump’s idea of bringing manufacturing jobs back home. Additional cause for concern comes from small business employment, companies that have less than 50 employees, as they lost 120k jobs in November. ADP showed negative prints in September, August and June as well painting the picture of weakening labor market and nudging Fed to cut next week.
ISM November services PMI ticked up to 52.6 from 52.4 in October while markets expected a reading of 52.1. The report shows slight improvement in business activity and employment indices while new orders slumped, but still show healthy 52.9. The biggest takeaway from the reading was prices paid component which fell to 65.4 from 70 in October indicating easing pricing pressures in the services sector. This gives another green light to Fed to proceed with a rate cut next week.
The yield on a 10y Treasury started the week at 4.02%, rose to 4.14% and finished the week at around 4.14%. The yield on 2y Treasury started the week at 3.50%, rose to 3.56% and finished the week at around 3.56%. Spread between 2y and 10y Treasuries started the week at 54bp and finished the week at 58bp. FedWatchTool sees the probability of a 25bp rate cut at December meeting at around 87% while probability of no change is at around 13%. Silver broke above $58 reaching new all time high and is now up more than 100% YTD. Bitcoin had a rough start of the week as it plunged from $91k to $84k. Oil started the week higher and finished the week higher as OPEC+ confirmed that production hikes will be paused from next year.
This week we will have weekly ADP data and Fed meeting. Markets have almost fully priced in a 25bp rate cut so focus will be on the expected number of cuts for 2026 presented in a Dot Plot.
Important news for USD:
Tuesday:
ADP Employment Change Weekly
Wednesday:
Fed Interest Rate Decision
EUR
November final manufacturing PMI was revised down to 49.6 from 49.7 as preliminary reported mainly due to Germany’s downward revision. The report shows that output and new orders recorded drops. Business confidence, however, continues to improve as companies see better conditions in the coming year. Final services PMI was revised up to 53.6 as both German and French readings saw upward revisions with Italy beating expectations but Spain missing, though still with a healthy 55.6 print. The report shows that output prices declined in services sector while input costs increased most likely due to rising wages. Given the positive readings in October and November PMIs we can see a slight acceleration in Q4 GDP. Composite printed a new 30-month high of 52.8 with French reading returning to expansion for after August of 2024.
Preliminary November CPI ticked up to 2.2% y/y while markets expected it to stay unchanged at 2.1% y/y. Core CPI stayed at 2.4% y/y as expected for the third straight month. There was a smaller than expected drop in energy prices and services inflation ticked up to 3.5% as main reasons for why inflation moved up. It is still staying too high for ECB to deliver a cut at December meeting. ECB policymaker Nagel commented that inflation is practically at the target and that it will fluctuate around it. Final Q3 GDP was revised up to 0.3% q/q from 0.2% q/q as preliminary reported. Household and government consumption as well as gross fixed capital formation contributed positively while net exports deducted from the reading.
GBP
Final manufacturing PMI for the month of November was unchanged at 50.2. The report highlights strengthening in both domestic and foreign demand as indicated by improvements in new orders and new export orders. Additionally, factory gate prices are declining for the first time in over two years. Final services PMI was revised up to 51.3 from 50.5 as preliminary reported thus lifting composite to 51.2 from 50.5 as preliminary reported. Both readings still show declines from 52.3 and 52.2 prints in October. The report shows modest increase in business activity but that was dwarfed by fastest fall in employment since February. New orders and new export orders growth stalled as demand is weakening both at home and abroad. One positive is that “prices charged by service sector firms increased at the slowest pace for nearly five years.”
BoE has announced that it will lower bank capital requirements to 13% from 14%. This is the first lowering since financial crisis of 2008. BoE governor Bailey stated that given the surrounding financial risks financial stability is of paramount importance. He also warned that risks to financial stability have risen.
AUD
Q3 GDP data showed economy grow by 0.4% q/q and 2.1% y/y vs 0.7% q/q and 2.2% y/y as expected. Household consumption grew by 0.5% and contributed 0.3pp to the reading while government spending grew by 0.8% and added 0.2pp to the GDP. Net trade deducted 0.1pp from the reading as imports rose faster than exports. Private investment grew by 2.9% thug making it the highest growth since Q1 of 2021. Q3 current account data showed the biggest deficit since 2016.
Official PMI data from China for the month of November saw manufacturing improve to 49.2 from 49 in October. New orders dropped and barely managed to stay in expansion with a 50.1 print. Non-manufacturing, comprises services and construction, dropped to 49.5 from 50.2 the previous month making it the first time it fell into contraction since December of 2022. Officials have blamed weaker demand due to holiday season (Golden Week holiday in October) but the slump in property related services was a big drag on the reading. Composite printed 49.7 thus also falling below 50 for the first time since December of 2022. RatingDog manufacturing PMI, former Caixin, measuring small and medium-sized companies, slipped into contraction with a 49.9 print. The report shows falling new orders but rising new export orders thus signifying difference between weak domestic and strong foreign demand. President Xi stated that China will expand domestic demand as one of the goals of the coming 15th five-year plan.
This week we will have RBA meeting and inflation data from China. Given higher inflation and decent growth numbers there will be no rate change.
Important news for AUD:
Tuesday:
RBA Interest Rate Decision
Wednesday:
CPI (China)
NZD
Former deputy governor of Sweden’s Riksbank Anna Breman became first female and first foreign governor of RBNZ. She pledged to be “laser focused” on inflation and is expected to provide steadier leadership within a bank.
CAD
November employment report saw economy add 53.6k jobs vs losing 5k jobs as was expected. This makes it a third straight month of 50+k jobs added. The unemployment rate plunged to 6.5% from 6.9% but participation rate also declined printing 65.1% vs 65.3% in October. Wages continued to grow at 4% y/y as they were previous month. Composition of jobs is not the brightest as it shows full-time employment (-9.4k) while all job gains were in part-time employment (63k). After the strong jobs report CAD strengthened across the board gaining around 1% against the USD.
This week we will have BoC meeting. The bank has signaled that they are on pause so there will be no rate change.
Important news for CAD:
Wednesday:
BoC Interest Rate Decision
JPY
Q3 CAPEX missed expectations and dropped hard printing 2.9% y/y after a 7.6% y/y in Q2. CAPEX ex-software also rose 2.9% y/y but smaller than 5.4% y/y as expected. These prints will be included into next week’s final Q3 GDP reading and will deduct from it. One positive is that company profits surged and showed a 19.7% y/y increase in the third quarter. October household spending provided a negative surprise as it printed -3% y/y vs 1% y/y and down from 1.8% y/y in September with monthly figure dropping 3.5%. This marks the first negative reading since February and worst reading in two years showing that consumer demand is very fragile. Government officials did damage control by saying that weakness was concentrated in food, leisure and auto-related spending and added that demand remains in a “recovery stage.”
Final manufacturing PMI for the month of November was revised down to 48.7 from 48.8 as preliminary reported but still shows an improvement from 48.2 in October. The report shows that new orders continued to decline, for the 30 consecutive months, as demand is weakening. Input prices continued to increase which may hurt companies if they don’t transfer costs onto consumers. Business optimism continued to improve spurred most likely by the incoming stimulus package from Takaichi government.
BoJ governor Ueda stated that current interest rate is still accommodative and added that bank is working to narrow the difference between it and neutral rate. When asked about the neutral rate he stated that it is in a wide band, from 1% to 2.5%. He did not explicitly say that bank will hike in December but given that short-term interest rate is at 0.5%, way below lower band of neutral rate projections, gives us only hints that rate hikes are coming, not the timing of them. Reuters reported, citing government officials, that hike in December depends solely on BoJ’s decision and that there is a desire within bank members to deliver rate cut before the year ends. Yield on 10y JGB climbed to 1.94%.
This week we will have final Q3 GDP print expected to be revised down due to weak CAPEX.
Important news for JPY:
Monday:
GDP
CHF
SNB total sight deposits for the week ending November 28 came in at CHF458.5bn vs CHF460.2bn the previous week. After a sudden increase in the past week deposits continue on their downward trajectory within a well-established trend. November CPI report showed headline number flat vs 0.1% y/y as expected and in October with core ticking down to 0.4% y/y from 0.5% y/y the previous month. SNB reiterates that inflation will pick up in the coming months.
This week we will have SNB meeting. The bank has stated that there is a high bar for dropping rates into negative territory so we see no rate change at this meeting.
Important news for CHF:
Thursday:
SNB Interest Rate Decision
