In the upcoming week, the key event is the US FOMC, though we and the consensus do not expect any key decisions to be taken. Though a strengthening of forward guidance is still possible, virtually nobody expects anything of import to be announced until the Dec meeting. In the upcoming week we also have five more central bank meetings in addition to the FOMC: Japan, New Zealand, India, Hungary and Israel. In Hungary we, in line with consensus, expect a 20bps cut to 3.40% in the policy rate. In India consensus expects a 25bps hike in the repo rate to 7.75%.
On the data front, US IP, retail sales and pending home sales are worth a look, but the key release will be the ISM survey at the end of the week, together with manufacturing PMIs around the world. US consumer confidence is worth a look, given the potential impact from the recent fiscal tensions.
A few other selected data releases are worth some attention. For example the latest Turkish trade numbers are relevant in the context of large external deficits in that country. Japanese wage data are interesting given the BoJ attempt to change inflation expectations. Finally, the Korean trade data will be the first hard data released globally for the month of October.
Monday, Oct 28
- Israel MPC: GS and consensus have policy rate unchanged. The housing boom continues to be a constraint on further monetary easing and a rate cut will arguable only have a limited impact on the exchange rate at this point.
- Australia RBA Governor speaks
- US IP (Sep): Consensus +0.4%, previous +0.4%
- US Pending Home Sales (Sep): Consensus -0.2%, previous -1.6%
- Japan Retail Sales (Sep): Cconsensus +1.8%yoy, previous +1.1%yoy
- Japan Household Spending (Sep): Consensus +0.5%yoy, previous -1.6%yoy
- Japan Unemployment Rate (Sep): Consensus 4.0%, previous 4.1%
- South Korea CA Balance (Sep): previous $+6.8bn
- Also interesting: Italy Business Confidence (Oct), Ukraine CA Balance (Q3)
Tuesday, Oct 29
- India MPC: consensus expects a hike of 25bps in repo and reverse repo rates to 7.75% and 6.75% respectively and has cash reserve ratio unchanged at 4.00%.
- Hungary MPC: Consensus expect a cut of 20bps to 3.40% in the policy rate
- US Consumer Confidence (Oct): Consensus 75.0, previous 79.7
- US PPI (Sep): Consensus +0.2%, previous +0.3%
- US Retail Sales (Sep): Consensus +0.1%, previous +0.2%
- US S&P Case Shiller Home Price Index (Aug): consensus +0.5%, previous +0.6%
- Japan IP (Sep): Consensus +1.8%mom, previous -0.9%mom
- Germany GFK Consumer Survey (Nov): previous +7.1
- France Consumer Confidence (Oct): previous 85
- South Korea IP (Sep): Previous +3.3%yoy
- Also interesting: UK Consumer Credit (Sep) and Mortgage Approvals (Sep)
Wednesday, Oct 30
- US FOMC: GS and consensus expect no change in monetary policy tools
- New Zealand MPC: Consensus have policy rate unchanged at 2.50%.
- US ADP Employment Change (Oct): consensus 160K, previous 166K
- US CPI (Sep): Consensus +0.2%, previous +0.1%
- Euro Area Consumer Confidence (Oct, final): consensus -14.5, previous -14.5 (flash)
- Germany Harmonized CPI (Oct, flash): previous +1.6%yoy
- Germany Unemployment Change (Oct): consensus flat, previous +25K
- Brazil IGP-M Inflation (Oct): GS +5.40%yoy, consensus +5.32%yoy, previous +4.40%yoy
- Also interesting: Ukraine GDP (Q3, prelim.), Spain GDP (Q3) and CPI (Oct, flash)
Thursday, Oct 31
- Japan MPC: GS and consensus expects no change in monetary policy stance. We also expect a small upward revision to growth in the published bi-annual outlook report
- Japan Total Cash Wages (Sep). GS -0.6%yoy, consensus -0.3%yoy, previous -0.9%yoy
- US Initial Jobless Claims: consensus 340K, previous 350K
- US Chicago PMI (Oct): GS 55.0, consensus 55.0, previous 55.7
- Euro Area Harmonized CPI (Oct, flash): GS +1.1%yoy, consensus +1.1%yoy, previous +1.1%yoy
- UK GFK Consumer Confidence (Oct): consensus -8, previous -10
- South Africa Trade Balance (Sep): consensus ZAR-16.0bn, previous ZAR-19.1bn
- Turkey Trade Balance (Sep): consensus $-7.30bn, previous $-7.02bn
- Thailand CA Balance (Sep): previous $+1.3bn
- Taiwan GDP Advance (Q3): consensus +2.5%yoy, previous +2.5%yoy
- South Korea CPI (Oct): Consensus +1.0%yoy, previous +0.8%yoy
- Also interesting: Australia Building Approvals (Sep) and Private Sector Credit (Sep), France Consumer Spending (Sep), Hungary Trade Balance (Aug, final), Switzerland FX Reserves (Q3)
Friday, Nov 1
- US Fed Speakers: Bullard (FOMC voter), Kocherlakota (non-voter), Lacker
- US ISM Survey (Oct): Consensus 55.0, previous 56.2
- US Motor Vehicles Sales (Oct)
- China PMI (Oct): Previous 51.5yoy
- UK Manufacturing PMI (Oct): consensus 56.4, previous 56.7
- Brazil Trade Balance (Oct): Consensus $+1.35bn mom, previous $+2.15bn mom
- Sweden Manufacturing PMI (Oct): consensus 54.5, previous 56.0
- Czech Republic Manufacturing PMI
- Switzerland Manufacturing PMI (Oct)
- Indonesia Trade Balance (Sep): consensus $-48mn yoy, previous $+132mn yoy
- Thailand CPI (Oct): GS +1.4%yoy, consensus +1.5%yoy, previous +1.4%yoy
- Also interesting: Mexico Workers Remittances (Sep), Peru CPI (Oct), South Korea Trade Balance (Oct), Russia Manufacturing PMI (Oct)
And from SocGen, a summary of the key investor issues:
NO FED TAPER … BUT BETTER DATA
We expect to see no change from the 28-29 October FOMC. Better data, however, will be a reminder to markets that Fed taper is delayed, not cancelled. We look for a 0.7% mom gain in September industrial production and while the headline retail sales number is likely to clock in at a fairly moderate 0.2% mom, ex-autos we look for 0.9%. We put the odds of a December tapering announcement at 5%, January at 30% and March at 60%.
BOJ HOPING FED WILL TAPER SOONER…
The BoJ presents new growth and inflation forecasts at this week’s meeting and our expectation is that there will be little change. Recent yen appreciation, however, presents a challenge to the BoJ. The BoJ is already purchasing around 70% of JGB issuance and the concern is that this is close to the limit of what is feasible. No doubt, the BoJ is hoping that the Fed will taper sooner rather than later, allowing the yen to resume a depreciation path. At that time, the BoJ could hope that even a small increase in its asset purchases (most likely to be ETFs) could have a greater impact. This week, however, we expect the BoJ to remain on hold and keep its powder dry.
…RBI THAT IT WON’T!
The delay of Fed tapering has allowed the INR to stage an appreciation of 10% against the US dollar from recent lows. This is helpful to the RBI, facing a near stagflation situation of runaway inflation and slowing growth. We expect the RBI to take this window of opportunity and hike rate 25bp on Tuesday (and perhaps even 50bp). Our expectation that the Fed will taper in Q1 means that any respite for the INR is likely to prove short-lived. Moreover, weak domestic data will mark an additional headwind. Ultimately, it is up to the government to implement desperately needed supply side reforms. The hope is that after the spring 2014 general election, the next government will indeed deliver.
CHINA POLICY TIGHTENING CREEPING BACK
We expect the official manufacturing PMI to decline to 50.8 from 51.1 in September. Interestingly, policy appears to be shifting back to risk management; the PBoC has withdrawn liquidity for two weeks and big cities are tightening restrictions on the property market again.
ECB LENDING SURVEY TO SHOW SLOW REPAIR
The ECB’s quarterly bank lending survey (Wednesday) is set to confirm an only very gradual improvement of the financial fragmentation still plaguing the periphery. As we detailed last week in our new Focus Banking Union report, we see significant potential wins from banking union. Last week, the ECB presented the comprehensive assessment that will pave the way for the Single Supervisory Mechanism (SSM) to come into effect in November 2014. An effective European Banking Union requires that the Single Resolution Mechanism (SRM) also be in place. The hope is to have this in place before the current legislative period ends as the European Parliament heads to elections in May 2014
Source: Goldman, SocGen