Key themes for the week ahead – inflation
Inflation is the key theme for this week with several more CPI reports due for Oct.
There will also be numerous US Fed speeches this week, the first look at US manufacturing momentum going into Nov, and US housing data for Oct.
Inflation
Key central bank policymakers have acknowledged that inflation has been more persistent than expected. Central banks have forecast that Inflation will likely ease through H1 next year as supply chains recover, Covid pressures ease, and labour markets continue to recover. But ST rates still reflect the likelihood that CB’s will start to hike earlier than expected.
From last week, consumer price inflation came in higher than expected in the US and China for Oct. In the US, CPI growth was +6.2% (exp +5.8%) and there was a broad contribution to the acceleration. By the end of the week, ST US rates (1-5yr) reached new YTD highs as the curve flattened even further.
The inflation data out this week is important in the context of the other key CB’s and ST rate forecasts; UK CPI (exp +3.9%), Canada CPI (exp +4.6%), Eurozone CPI (exp +4.1% and +0.8% mth), Japan CPI (exp +0.2%) and the Aus Wage Price Index (exp +2.2% YoY and +0.5% Qtr). Japan is the obvious exception.
Growth Momentum
This week US industrial production data for Oct will be released (exp +0.7% v -1.3% Sep) – last month was lower due mostly to a further 7% decline in motor vehicle output. We will also get the first view of US manufacturing momentum going into Nov with several regional surveys to be released. This will provide further insight into the progress of supply chain issues, prices, and impact on output.
This week, the US Treasury will settle approx. $363bn in ST Bills, Notes, and Bonds, raising approx. $37bn in new money. This includes the addition of a $60bn 14-Day CMB this week.
The US Treasury will also auction 10yr TIPS and the 30yr Bond this week – to settle on 30 Nov.
A decision on the US Fed Chair position is imminent.
Next week is a short week due to the US Thanksgiving holiday.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
