Market Outlook for the Week of 28th October – 1st November

The week begins quietly on Monday, with no major economic events scheduled for the FX market. Be mindful of the daylight saving time shift in Europe, which may affect trading schedules.

Bank of Canada Governor Tiff Macklem will speak at a fireside chat about the Canadian economy at The Logic Summit in Toronto on Monday. There is no media availability for this event, but he is expected to reiterate his recent public statements.

On Tuesday, U.S. economic releases will include the CB consumer confidence index and JOLTS job openings. Wednesday will bring Australia’s inflation data, while in the U.S., releases include the ADP non-farm employment change, advance GDP q/q and pending home sales m/m.

Thursday will feature Japan’s monetary policy announcement alongside the Bank of Japan’s outlook report. In the eurozone, inflation data will be released, and in Canada, monthly GDP data will be published. For the U.S., important releases will include the core PCE Price Index m/m, the employment cost index q/q and unemployment claims.

Friday’s releases include Switzerland’s inflation data and a series of important U.S. data points: average hourly earnings m/m, non-farm employment change, the unemployment rate and the ISM manufacturing PMI.

This week Australia’s inflation data is expected to finally reach the desired 2-3% target range for the first time since mid-2021. This decline is largely due to lower gasoline and electricity prices. However, core inflation remains a concern, as it is likely to print above 3% due to strong labor market conditions.

The market currently anticipates that the RBA will keep its monetary policy unchanged at the upcoming November meeting.

The consensus for U.S. advance GDP q/q is 3.0% vs prior 3.0%. The U.S. economy has shown improvement compared to the beginning of the year, and this is likely to be reflected in this week’s data.

A primary driver of this growth has been consumer spending, especially in services, with the housing market and exports being the main drags. However, if the labor market continues to soften, there is a risk that consumer spending and therefore GDP growth could be negatively impacted, despite the lower interest rates.

At this week’s meeting, the BoJ is expected to keep its monetary policy unchanged. The market will closely monitor the BoJ’s quarterly outlook report, with analysts anticipating an upward revision to inflation projections for this year, no change for 2025, and a downward revision for GDP growth.

The BoJ has faced criticism regarding its communication about policy normalization this year, so ING analysts expect an improvement in this area. Recently, inflation in Japan has hovered around the 2.0% target. If it continues to trend higher, supported by wage growth and improving economic conditions, there is a likelihood that the BoJ could implement a 25 bps rate hike at the January and April meetings next year.

The consensus for the U.S. core PCE price index m/m is 0.3% vs 0.1% prior; personal income m/m is expected at 0.3%, compared to 0.2% previously; and personal spending m/m is projected at 0.4%, an increase from the prior 0.2%.

The economy’s soft landing has been supported by resilient U.S. consumers, strengthened by better-than-expected income and spending data throughout 2024. Revised data for August also confirmed that consumers are maintaining their spending capacity.

With this momentum, September is expected to show continued strength, with projected monthly growth in both personal income and spending. Inflation, measured by the Fed’s preferred PCE deflator, is forecasted by Wells Fargo to rise by 0.2% for the month, bringing annual inflation in line with the Fed’s 2.0% target if realized.

In the U.S., the consensus for the average hourly earnings m/m is 0.3% vs the prior 0.4%; non-farm employment change is expected at 111K, compared to the previous 254K, while the unemployment rate is anticipated to remain steady at 4.1%.

Following a better-than-expected report last month, this week’s data is likely to reflect a cooling trend in the labor market, though accuracy may be affected by recent bad weather conditions that impacted workers. Analysts also note that the strike at Boeing could weigh on the payroll data.

Regardless of this report, there are underlying signs that the labor market will continue to soften in the near term, with workers facing decreasing job opportunities as new hiring is concentrated in certain industries.

Wish you a profitable trading week.

This article was written by Gina Constantin at www.forexlive.com.