In the European session, we don’t have much on the agenda other than a couple of low-tier releases like the French current account and the Swiss consumer confidence data. None of the data will change anything for the respective central banks.
In the American session, we have the Canadian employment report and the US University of Michigan consumer sentiment report. The Canadian employment report is expected to show -2.5K jobs loss in October vs +60.4K in September, and the unemployment rate to remain unchanged at 7.1%.
The BoC cut interest rates by 25 bps last week as expected bringing the policy rate to the lower bound of their neutral estimate of 2.25%-3.25%. The central bank has also signalled that they reached the end of their cutting cycle, although they kept the door open for another cut if needed.
In fact, the statement said: “if inflation and economic activity evolve broadly in line with the October projection, Governing
Council sees the current policy rate at about the right level to keep
inflation close to 2% while helping the economy through this period of
structural adjustment. If the outlook changes, we are prepared
to respond. Governing Council will be assessing incoming data carefully
relative to the Bank’s forecast.”
In the monetary policy report, the BoC said that the decline in population growth means fewer new jobs are needed to keep the employment rate steady. By the end of 2025, it estimated that fewer than 5,000 jobs will
need to be added each month to sustain the employment rate. This compares with an average of 18,000 new jobs needed each month
between 2000 and 2019, and more than 60,000 new jobs per month needed in
the first half of 2024, when population growth was much higher.
At this point, I don’t see the labour market report today mattering too much for the BoC as they will see another one before their next decision. Nonetheless, the market is still seeing roughly a 20% chance of one last cut in December, so big negative surprises could weigh on the Canadian dollar. Conversely, good data should support the Loonie in the short-term considering that it’s been battered for quite some time.
The University of Michigan consumer sentiment is expected at 53.2 vs 53.6 prior. The report noted that inflation and high prices remain at the forefront of consumers’ minds. We saw a similar drop in sentiment in 2021 when inflation was rising fast. Maybe, there is indeed an inflation problem that the Fed is still not acknowledging due to the perceived higher risk of labour market weakness.
Long-term inflation expectations in the UMich survey have been rising steadily since July and they are now standing at 3.9%. The Fed has been paying more attention to long-term market-based inflation expectations though, which are now at 2.2% looking at the 5y5y forward inflation rate (the one that Powell looks at).
Central bank speakers:
- 08:00 GMT/03:00 ET – Fed’s Williams (neutral – voter)
- 09:00 GMT/04:00 ET – SNB’s Tschudin (neutral – voter)
- 12:00 GMT/07:00 ET – Fed’s Jefferson (neutral – voter)
- 12:00 GMT/07:00 ET – ECB’s Nagel (neutral – voter)
- 12:15 GMT/07:15 ET – BoE’s Pill (hawkish – voter)
- 13:30 GMT/08:30 ET – ECB’s Elderson (neutral – voter)
- 15:15 GMT/10:00 ET – BoE’s Pill (hawkish – voter)
- 20:00 GMT/15:00 ET – Fed’s Miran (uber dove – voter)
This article was written by Giuseppe Dellamotta at investinglive.com.
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