Looking ahead, Thursday will be a busy day with the ECB (plus Draghi’s press conference) and BoE meetings. Some are expecting the ECB to cut rates as early at this week although most believe the rate cut will not happen until December. Draghi will likely deflect the exchange rate’s relevance via its impact on inflation forecasts. This could strengthen the credibility of the forward guidance message, but this is just rhetoric — a rate cut would require a rejection of the current recovery hypothesis. They expect more focus on low inflation at this press conference, albeit without pre-empting the ECB staff new macroeconomic forecasts that will be published in December.
Elsewhere on Thursday, the advanced Q3 GDP report for the US is scheduled, which may have some bearing on market expectations for tapering. Consensus is calling for 2% QoQ ann growth. We’ll be interested in the nominal growth numbers as ever to see whether the recent global inflation downdraft continues to keep YoY US nominal GDP depressed. The first two quarters of the years have seen this number at only 3.1% – the lowest since 2010. Other data releases on Thursday include German industrial production and US initial jobless claims.
This week we have a lot of CB speakers from major regions. On Tuesday, BoJ Governor Kuroda will speak while we also await the BoJ minutes from the last meeting. Interesting to see what Draghi and other ECB speakers will say after a soft inflation number before the ECB announcement on Thursday. We forecast no change in the monetary policy stance. We also have a BoE decision on Thursday. Again, we do not anticipate change in the policy stance. Other MPC meetings this week: Australia, Russia, Poland, Czech Republic, Malaysia, and Peru – in all cases we and consensus forecast no changes in the policy rates.
In China on Saturday together with important data releases we also have the widely anticipated commencement of the 3rd plenary session during which a package of economic reforms could be announced.
Monday, Nov 4
- Euro Area ECB speakers: Asmussen, Nowotny
- Euro Area PMIs (Oct final): Consensus 51.3, previous 51.3 (Flash)
- US Fed speakers: Powell (FOMC voter), Rosengren (FOMC voter), Fisher (FOMC non-voter)
- US Factory Orders (Aug): consensus +0.3%, previous -2.4%
- US Factory Orders (Sep): consensus +1.8%
- UK PMI Construction (Oct): consensus 58.7, previous 58.9
- Turkey CPI (Oct): consensus +7.2%yoy, previous +7.9%yoy
- Also interesting: Spain PMI (Oct), UK HBOS House Prices (Oct)
Tuesday, Nov 5
- Australia MPC: Consensus has cash rate target unchanged at 2.50%. Financial markets have all but completely ruled-out a chance of a rate cut in November (~3% chance), with only a one-in-three chance of another 25bp reduction this cycle. We continue to lean towards another reduction by March 2014.
- Euro Area ECB speakers: Draghi, Asmussen
- US Fed Williams (FOMC non-voter) speaks
- US ISM Non-manufacturing (Oct): consensus 54.0, previous 54.4
- Japan BoJ governor Kuroda speaks in Osaka
- Japan BoJ MPC minutes
- Chile MPC minutes (Oct)
- UK PMI Composite (Oct): previous 60.5
- Switzerland CPI (Oct): consensus -0.1%yoy, previous -0.1%yoy
- Taiwan CPI (Oct): consensus +1.1%yoy, previous +0.8%yoy
- Chile Economic Activity Index (Sep): consensus +4.2%yoy, previous +4.1%yoy
- Also interesting: Canada Trade Balance (Sep), Venezuela INPC Headline Inflation (Oct), Philippines CPI (Oct), Colombia CPI (Oct)
Wednesday, Nov 6
- Poland MPC: Consensus has policy rate unchanged at 2.50%
- US Fed Pianalto (FOMC non-voter) speaks
- UK BoE Don Kohn speaks
- US Non-Farm Productivity and Unit Labour Costs (Q3 prelim.)
- Euro Area PMIs Services (Oct final): Consensus 50.9, previous 50.9 (Flash)
- Euro Area PMI Composite (Oct final): Consensus 51.5, previous 51.5 (Flash)
- Euro Area Retail Sales (Sep): consensus +0.6%yoy, previous -0.3%yoy
- Germany Factory Orders (Sep): consensus +5.6%yoy, previous +3.1%yoy
- UK IP (Sep): Consensus +1.8%yoy, previous -1.5%yoy
- Czech Republic Trade Balance (Sep): consensus EUR+33.3bn, previous EUR+20.6bn
- Indonesia GDP (Q3): consensus +5.7%yoy, previous +5.8%yoy
- Also interesting: Russia CPI (Oct), Czech Republic IP (Sep)
Thursday, Nov 7
- Euro Area MPC: Consensus has main policy tools – interest rate and deposit facility rate – unchanged at 0.50% and 0.00% respectively. The ECB is expected to express more explicitly its concern about the recent strength of the Euro
- UK MPC: Consensus has main policy tools – policy rate and asset purchases – unchanged at 0.50% and GBP375bn respectively. Consistent with its forward guidance framework, the MPC will almost certainly leave policy unchanged at its November meeting. The messages of the subsequent Inflation Report are somewhat less clear. An improved outlook for growth in Q3 and Q4 suggests the BoE will revise lower its unemployment rate forecast
- Malaysia MPC: Consensus has policy rate unchanged at 3.00%yoy
- Peru MPC: Consensus has policy rate unchanged at 4.25%yoy
- US Fed Stein (FOMC voter) speaks
- US GDP (Q3 adv.): Consensus +2.0%, previous +2.5%
- US Initial Jobless Claims: consensus 335,000, previous 340,000
- Germany IP (Sep): consensus +0.8%yoy, previous +0.3%yoy
- Brazil IPCA Inflation (Oct): Consensus +5.87%yoy, previous +5.86%yoy
- Chile Trade Balance (Oct): consensus $-132mn, previous $-220mn
- Taiwan Trade Balance (Oct): consensus $+3.2bn yoy, previous $+2.3bn yoy
- Mexico INPC Core Inflation (Oct): Previous +2.52%yoy
- Also interesting: US Consumer Credit (Sep), UK Halifax House Prices (Oct), Switzerland FX Reserves (Oct)
Friday, Nov 8
- Russia MPC: Consensus have weekly auction rate unchanged at 5.50%
- US Fed speakers: Bernanke (FOMC voter), Lockhart (FOMC non-voter), Williams (FOMC non-voter), Fisher (FOMC non-voter)
- US Ex-candidate for Fed governor Lawrence Summers speaks at IMF
- US Non-farm Payrolls (Oct): Consensus 125K, previous 148K
- US Unemployment Rate (Oct): Consensus 7.3%, previous 7.2%
- US Personal Consumption (Sep): Consensus +0.2%, previous +0.3%
- US Personal Income (Sep): Consensus +0.3%, previous +0.4%
- US U. of Michigan Consumer Sentiment (Nov, provisional): Consensus 74.5, previous 73.2
- Euro Area ECB Asmussen speaks
- Mexico MPC minutes (Oct)
- Colombia MPC minutes (Oct)
- China Trade Balance (Oct): consensus $+23.5bn yoy, previous $+15.2bn yoy
- UK Trade Balance (Sep): consensus GBP-2.70bn, previous GBP-3.32bn
- Malaysia Trade Balance (Sep): consensus MYR+6.00bn, previous MYR+7.11bn
- Also interesting: France IP (Sep), UK Construction (Sep), Canada Housing Starts (Oct), Sweden IP (Sep), Chile CPI (Oct)
Saturday, Nov 9
- China IP (Oct): consensus +10.1%yoy, previous +10.2%yoy
- China CPI (Oct): consensus +3.3%yoy, previous +3.1%yoy
- China PPI (Oct): consensus -1.4%yoy, previous -1.3%yoy
- Retail Sales (Oct): consensus +13.4%yoy, previous +13.3%yoy
SocGen’s visual summary of the above:
And the key issues as summarized again by SocGen:
ECB NEEDS TO DO MUCH MORE THAN CUT RATES
Expectations of soon to come ECB action and a stronger US ISM manufacturing release (56.4 in
October) pushed the EUR/USD back below 1.35 on Friday, triggering a welcome sign of relief in the euro area. Nonetheless, the euro remains uncomfortably strong and inflation uncomfortably low. It is this combination that we now expect will push the ECB to a December rate cut. Alone, however, we expect a 25bp rate cut to have only a very modest impact on the EUR/USD; nor will it do much to fix the financial fragmentation that plagues the periphery.
This was a point that we also made when the ECB last cut rates in back in May. Fed taper expectations may help push the EUR/USD lower, but with a nasty twist as US bond yields then head north. Either way, the ECB will have to do more. Banned from QE, we see a fixed rate LTRO as the best tool at the ECB’s disposal. This would have the ability to cement a commitment to low interest rates for an extended period of time, helping on both the currency and bond market front. Ultimately, however, to get the euro area’s credit channels working again we believe it will be up to the government rather than the ECB. Our base case remains that repair of financial fragmentation will come only slowly.
BETTER US DATA BETTER HOPE FOR EUROPE
We expect to see overall healthy readings across a busy week of US data releases. October non-farm payrolls due on Friday will be the most closely watched report of the week and we expect to see a gain of +175K. Following in the wake of the strong manufacturing ISM released last Friday, we expect to see a gain to 56 on the service sector. Q3 GDP also out this week is expected to clock in at 2.3% qoq annualised. Stronger US data will see Fed taper expectations rebuild; with a still unresolved situation on the fiscal front we maintain our base case scenario for taper to start at the March FOMC.
CHINA STILL BUMPY LANDING
Monthly activity data for October are expected to show softer activity growth against a backdrop on on-going deleveraging pressures. It is against this backdrop that the Third Communist Party Plenary meeting is due to take place on 9-12 November. We do not expect detailed reform measures to emerge, but look rather for a broader policy framework focusing on financial market and corporate sector liberalisation. Changes to the Hukou system (a system of mandatory household registration that leads unequal social benefits between urban and rural population in China), on the other hand, will most likely have to wait. The key test for reform resolve will come in the three to six months that follow the meeting; this is when we will see just how many tangible measures are taken.
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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/21HwF958MwQ/story01.htm Tyler Durden