BoE and RBA meetings, employment data from the US, New Zealand and Canada, coupled with inflation from Switzerland and ISM PMIs from the US will highlight the week ahead of us. US government shutdown persists and if it lasts until the end of the week it will be the longest shutdown in history.
USD
Over the weekend Treasury Secretay Bessent stated that trade talks in Malaysia resulted in China resuming its soybean purchases and delaying rare earth export curb by a year. Trade tensions with Canada are escalating as two sides are not set to sit down and discuss the issues. Argentina president Millei managed to win the mid-term elections as his party won around 41% of votes and 1/3 of seats in the Congress. His victory was funded by US currency swap line to the tune of $20bn.
Bessent has named five candidates for the position of next Fed Chairman. They are Fed Governor Christopher Waller, Fed Governor Michelle Bowman, National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh and Rick Riede who is currently acting as BlackRock executive. Markets are giving Hassett the biggest chance followed by Waller and Warsh.
ADP will deliver weekly updates on the jobs market. The first reading shows 14 250 jobs added and is a for the four week period ending October 11. New plan is for ADP report to be released every Tuesday. It is stated in the official release that “The preliminary U.S. estimate will provide a four-week moving average of the latest total private employment change, offering the most current, representative picture of the private-sector labor market.” When we take into account government shutdown and issues with BLS we can see ADP becoming the main indicator of health in the jobs market.
Fed has cut rate by 25bp, as was expected, with new rate now being in the range of 3.75-4%. We had two dissenters this meeting, Schmid who wanted to leave rate unchanged and Miran who wanted a 50bp rate cut. Jobs growth has slowed down but the unemployment rate remains low and the committee judges that downside risks to employment rose in past few months. They have also decided to reinvest proceeds from MBS into T-Bills starting from December 1. The committee remains data-dependent, taking into account wide range of information before deciding to act and are ready to adjust its stance if risks arise that would impede their outlook.
Fed Chair Powell delivered more hawkish message at the press conference stating that this was a risk management cut and that December cut is not a “foregone conclusion”. He mentioned that policy is still modestly restrictive but that has now moved into neutral range. They are watching inflation expectations very closely. Powell used analogy of slowing down when driving in the fog it is appropriate to slow down which could be interpreted that since there are not government issued data they should slow down the pace of cuts. According to Powell, there are strongly differing views about path forward within the committee.
President Trump characterized his meeting with President Xi as “amazing” and “on a scale of 1 to 10, the meeting with Xi was a 12”. He added that many decisions were made and that China’s purchases of soybeans will begin immediately. This new agreement is for one year and after that it is expected to be renewed. Tariffs on China will be lowered to 47% from current 57%. Trump will be visiting China in April of next year with Xi visiting US not longer after that. China has confirmed that it will pause rare-earth export restrictions for one year.
The yield on a 10y Treasury started the week at 4.02%, rose to 4.12% and finished the week at around 4.11%. The yield on 2y Treasury started the week at 3.50%, rose to 3.63% and finished the week at around 3.60%. Spread between 2y and 10y Treasuries started the week at 52bp and finished the week at 51bp. FedWatchTool sees the probability of a 25bp rate cut at December meeting around 63%, while probability of a no cut is around 37%.
This week we will have ISM PMI data as well as now main source of employment data ADP.
Important news for USD:
Monday:
ISM Manufacturing PMI
Wednesday:
ISM Services PMI
ADP Employment Change
EUR
ECB survey showed 1-year inflation expectations tick down to 2.7% from 2.8% as seen in previous survey while both 3-year and 5-year inflation expectations remained unchanged at 2.5% and 2.2% respectively. So five years ahead we will still have inflation above the 2% target. French Q3 GDP surprised to the upside with a 0.5% q/q growth vs 0.1% q/q as expected and up from 0.3% q/q in the second quarter.
ECB has kept rates unchanged at 2% as was widely expected. The economy has continues to grow and Governing Council’s assessment of the inflation outlook remains broadly unchanged. The bank remains data-dependent and in meeting-by-meeting mode. ECB President Lagarde welcomed stronger GDP figures at the press conference. She has emphasized the concern around services inflation being persistently too high. ECB policy remains in a “good place”.
Final inflation data for the month of September saw headline number tick down to 2.1% y/y from 2.2% y/y in August while core reading remained unchanged at 2.4% y/y. Base effects in energy were the main culprit for a step-down headline number. Concerns can be found in services inflation as it rose to 3.4% y/y from 3.2% y/y the previous month.
GBP
This was a tough week for GBP as it was pummeled down by lower than expected inflation print which in turn increased the chances of a rate hike in December. The currency managed to recover some loses against CHF as the week come to a close but it was down against other majors.
This week we will have BoE meeting. No change in rate is expected but we may see a 6-3 vote with voices getting louder about a December cut.
Important news for GBP:
Thursday:
BoE Interest Rate Decision
AUD
Q3 inflation data came in hotter than expected. Headline number printed 1.3% q/q and 3.2% y/y while markets were expecting 1.1% q/q and 3% y/y prints. Numbers showed huge jump from Q2 when prices grew by 0.7% q/q and 2.1% y/y. Core reading, trimmed mean, printed 1% q/q and 3% y/y compared to 0.8% q/q and 2.7% y/y as expected. RBA targets core CPI in range of 2-3% and given that it is now at the upper limit as well as hawkish comments from governor Bullock which emphasized importance of core inflation coming down we see no further rate cuts this year. AUD should be supported by a combination of hawkish RBA and positive trade news from China.
This week will have RBA meeting. With inflation coming in hotter than expected there will be no change at this meeting and markets expect RBA to confirm no change till the end of the year.
Important news for AUD:
Tuesday:
RBA Interest Rate Decision
NZD
RBNZ governor Hawkesby stated that it is of crucial importance that central bank has fully operational independence. Business confidence surged in October to 58.1 from 49.6 in September. There have been 300bps of rate cuts since rate cutting cycle started in August of 2024 and they are pushing confidence among businesses up. Investment intentions, ease of credit access and profit expectations all improved while employment and pricing intentions declined. Inflation expectations rose and hit a one-year high. NZD had a good week as it profited from positive trade talks between US and China.
This week we will have Q3 employment data.
Important news for NZD:
Tuesday:
Employment Change
Unemployment Rate
CAD
BoC has delivered widely anticipated 25bp rate cut thus bringing the rate to 2.25%. Canadian economy had a weak Q2 as GDP contracted by 1.6% and with trade tensions with the US persisting it is expected that growth in second half of the year will be weak. Projections for growth are revised down and are now at 1.2% in 2025 vs 1.8% previously, 1.1% in 2026 vs 1.8% previously and 1.6% in 2027 . On a quarterly basis, growth is expected to pick up in Q1 of 2026. Labour market remains soft. Inflation remains elevated but inflation pressures are expected to decrease in the coming months which should keep CPI near 2%. Projections are for CPI at 2% in 2025 vs 2.4% as previously seen, 2.2% vs 2.1% previously for 2026 and 1.6% for 2027. “Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment.” The bank remains data-dependent and prepared to respond if the outlook changes.
This week we will have employment data.
Important news for CAD:
Friday:
Employment Change
Unemployment Rate
JPY
BoJ has left rate unchanged at 0.50% as expected with a 7-2 vote. Two members, Takata and Tamura, wanted a 25bp rate hike stating that upside risks to prices should lead to normalisation of monetary policy. Members see economic risks as tilted to the downside and expect exports growth to slow down due to lower foreign demand and tariffs. Underlying inflation is expect to moderate due to slower growth but then return to the 2% target in fiscal year (FY) 2027. Core CPI is seen at 2.7% for FY 2025, 1.8% for FY 2026 and 2% for FT 2027. Real GDP is seen at 0.7% for FY 2025 and 2026 and 1% for FY 2027. September PPI surged to 3% y/y from 2.7% y/y in August while markets were expecting it to stay unchanged. Nikkei stock index has crossed 50 000 level for the first time.
CHF
SNB total sight deposits for the week ending October 24 came in at CHF471.5bn vs CHF473.8bn the previous week. Deposits are back to the level last seen a month ago as SNB still stays on the sidelines and lets market forces dictate Swissy strength.
This week we will have inflation data.
Important news for CHF:
Monday:
CPI
