a jam-packed few days ahead!
It is a jam-packed few days ahead that includes interest rate announcements from the Fed and ECB (and the Bank of Japan); some top tier economic data, including GDP and inflation in the US; earnings results from two of the AI hyperscalers, Microsoft and Alphabet; and the Budget in the UK. Regarding the central bank meetings, the Fed and ECB both look set to leave interest rates unchanged, at 3.75%-4% and 2.5% respectively, and while neither its likely to pre-commit to raising rates at their final meeting of the year in December, neither are they likely to say anything that would dissuade the market from expecting them to do so. Ahead of all of this, the dollar is edging higher across the board. It is trading at around $1.1155 and $1.3325 versus the euro and sterling respectively, up from about $1.12 and $1.3375 at the close of business last Friday. EURGBP is little changed from last week’s closing levels, trading at around £0.8375 this morning.
French government bonds outperformed notably yesterday, with 10-year yields falling by around 12bps and spreads over equivalent German yields narrowing by around 10bps, helped by Moody’s announcement last Friday that it was leaving the country’s credit rating unchanged (at Aa3) albeit still on negative outlook. German yields edged higher across the curve yesterday, while US and UK yields were slightly higher at the short-end of the curve but slightly lower further over the curve. Equity markets had a positive session with US and European stocks both closing almost 1% higher on the day, helping to reverse some of the losses they chalked up over the latter part of last week.
Euro area economic growth moderated in October, but remained positive, according to Friday’s flash PMIs, dragged down by a decline in activity in France, while cost pressures for firms in the zone intensified due to rising energy prices. The equivalent data for the UK pointed to an acceleration in the pace of economic activity at the start of the fourth quarter, though there were some reports of “pause spending” ahead of the Budget, while costs pressures remained “elevated”.
As mentioned, it’s a very busy few days ahead. The Fed and ECB announce interest rate decisions tomorrow (Wednesday) and Thursday respectively (and the Bank of Japan on Friday), while the Chancellor of the Exchequer, John Healey, presents his first Budget in the UK tomorrow. Economic data due include Q3 GDP and PCE inflation for September in the US on Thursday, and Euro area GDP for Q3 on Friday, while today sees the release of money supply/credit growth (September) in the Euro area and consumer confidence (October) in the US.