Market Outlook for the Week of 18th – 22nd November

A quiet week lies ahead in terms of scheduled economic events, though a few key releases and updates will still garner attention.

On Tuesday, Australia will release the minutes from the RBA’s monetary policy meeting, providing insights into the central bank’s outlook. In the U.K., the monetary policy report hearings will take center stage, while the highlight of the day will be Canadian inflation data.

The focus shifts to the U.K. on Wednesday with the release of CPI data, which could offer hints about the Bank of England’s policy trajectory.

On Thursday, attention turns to the U.S., where unemployment claims and existing home sales data are set to be released, providing further indicators of the labor market and housing sector health.

The week wraps up on Friday with the release of flash services PMI and flash manufacturing PMI data for Australia, Japan, the eurozone, the U.K., and the U.S. Additionally, retail sales m/m figures will be published for both the U.K. and Canada.

Throughout the week, remarks from various FOMC members are expected.

In Canada, the consensus for CPI m/m is 0.3%, compared to the prior -0.4%. The median CPI y/y is expected at 2.2% vs the previous 2.3%, while the trimmed CPI y/y is projected to remain steady at 2.4%.

This week’s inflation data will be closely watched for insights into the BoC’s future approach to monetary policy easing. Overall, inflation in Canada appears to be moving in the right direction, reinforcing expectations that the BoC will continue cutting rates at its December meeting, followed by further reductions in January, March and June next year.

Currently, analysts are divided on whether the BoC will implement a 50 bps or 25 bps rate cut, highlighting the uncertainty around the Bank’s next steps. Analysts from Wells Fargo currently forecast a 25 bps after the Bank’s more aggressive 50 bps cut in October.

The argument is that while good progress has been made on the inflation front, the labor market and economic activity have only seen gradual softening. There are also risks to Canada’s economic performance if U.S. President Elect Trump decides to go ahead with the implementation of trade tariffs that he campaigned on.

In the U.K., the consensus for CPI y/y is 2.2% vs the prior 1.7%, while core CPI y/y is expected at 3.1%, compared to 3.2% previously.

Last month, headline CPI y/y fell for the first time since April, but this week’s data is projected to show an increase to 2.2%. The BoE will closely monitor this release to inform its decision on whether to implement another rate cut in December.

Services inflation remains a key concern, with expectations for it to print at 5.0%, aligning with the MPC’s November forecast.

In the U.S., the consensus for existing home sales is 3.94 million, up from the previous 3.84 million.

Housing activity remains subdued due to persistently high mortgage rates and elevated home prices. In September, existing home sales fell to an annualized pace of 3.84M, marking the slowest level since 2010, despite a brief mid-month decline in 30-year mortgage rates, as noted by analysts at Wells Fargo.

While a modest rebound is anticipated, sales remain historically weak. Adverse weather conditions, including the impact of hurricanes, have added further strain. With mortgage rates climbing back to 6.8%, housing activity is likely to remain under pressure in the near term.

This week’s PMI data for the Eurozone will provide insight into the state of the economy. The outlook remains pessimistic, despite steady Q3 growth, as recent surveys point to stagnation.

As a reminder, last month’s data was mixed, with the services PMI showing a slight improvement at 51.6, while the manufacturing PMI remained in contractionary territory at 46.1.

Analysts are concerned about potential tariffs from Trump that could weigh on growth. On the monetary policy front, the ECB is expected to implement 25 bps rate cuts at upcoming meetings. If economic conditions worsen, there is a risk of higher rate cuts.

In Canada the consensus for the core retail sales m/m is -0.5% vs prior -0.7% and for the retail sales m/m is 0.3% vs prior 0.4%. RBC analysts note that auto and gas sales have declined during the month, so headline growth was most likely supported by sales of core goods.

Wish you a profitable trading week.

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