The past week was a little slow, trade deal speculation and baffling UK election gaffs aside. There’s a lot more economic data to come over the next week, with particular focus it seems on the UK and China. Unfortunately, both countries have a lot bigger issues to contend with that investors are far more concerned with than a few data pieces, even if one could – albeit not expected to – put the UK in recession.
Two central bank meetings next week, with a rate cut heavily priced in from the Reserve Bank of New Zealand, while Banxico in Mexico is expected to hold. Central banks have become a lot more active in the last 12 months, investors will be keen to see whether this will continue or if, like the Fed, the mid-cycle adjustment has run its course.
Trade war developments
UK election drama
The US dollar has somewhat stabilized following last month’s Fed signal that interest rates will be on hold. The mid-cycle adjustment playbook from the 1990s suggest we could see no changes in policy for a couple of meetings, but that should not suggest that the Fed is anywhere close to tightening.
Investors will closely watch the Wednesday release of inflation data followed by Friday’s retail sales report. Persistent low inflation will motivate the Fed into delivering further rate cuts and possible additional measures in the coming year. Inflation on a month over month basis is expected to rise 0.3% in October, while the reading 12-months through last month will remain steady at 1.7%.
Retail sales is widely expected to bounce back following last month’s surprise drop, which was the first decline in seven months. Consecutive retail sales misses will yield calls that US consumer is weakening. If we see softer inflation data and another miss with retail sales, Fed rate cut bets will rise sharply.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.