After an impressive nonfarm payroll report and a successful avoidance of a Fed ‘taper tantrum’, the focus shifts to inflation. Everything from earnings season, the regional Fed surveys, and the ISM reports suggest that global supply chain pressures remain intense, and that inflation will remain elevated. The October inflation report is expected to show pricing pressures run to the hottest levels since 1990.
Given the broad-based inflation signs hitting both sides of the Atlantic, traders will look to see if the upcoming global inflation reports are able to unwind the surge in Treasuries and move forward expectations for the Fed to raise rates.
For the US, the upcoming week is filled with Fed speak, a couple of key Treasury auctions (3-year and 10-year), PPI and CPI reports, and consumer sentiment. In Asia, the focus will fall on Chinese trade, credit, and inflation data. In Europe, traders will eye the German ZEW survey, Russian GDP, UK GDP and Eurozone industrial production data.
Country
US
After an impressive nonfarm payroll report that included strong revisions to the prior two months, the US labor market recovery got its groove back. It was a busy week that contained a dovish Fed taper announcement that triggered a major reset with Fed rate-hike expectations, Democrats inched closer to delivering on President Biden’s agenda, the US added 531,000 jobs in October, and promising data with Pfizer’s COVID pill.
Wall Street will now fixate over the upcoming inflation report that could show the fastest increase since 1990. Surging energy costs, persistent supply chain issues, and rising labor costs could have both the PPI and CPI reports run hotter-than-expected.
The majority of next week’s Fed speak will be before the inflation report but will still be closely watched. On Monday, Fed’s Clarida speaks about the prospects for monetary policy, Fed Chair Powell will make opening remarks at the Fed Diversity Conference, Fed’s Harker speaks to the Economic Club of New York, Fed’s Bowman talks about the housing market, and Fed’s Evan’s talks about the economy. On Tuesday, we will hear again from Powell, Fed’s Bullard, Fed’s Daly and Fed’s Kashkari. On Friday Fed’s Williams speaks.
EU
Next week has little to offer from the EU. We’re in wait and see mode ahead of the December ECB meeting, at which point we may have a better idea of what will replace PEPP in March, if anything.
The only standout events come on Tuesday as we get the ZEW economic sentiment readings and hear from ECB President Christine Lagarde. Investors weren’t buying the “inflation is transitory” message last week. Maybe she’ll have more luck on Tuesday.
UK
After this week’s BoE meeting, it’s clear the MPC is uncertain on the path for inflation and interest rates and is hesitant to pull the trigger. Yet it knows it has backed itself…
Read More: Week Ahead – All About Inflation Now