- Since the US CPI release last Tuesday, most asset classes have performed well, ruling out further Fed tightening. The dollar has fallen nearly 2% as the data suggested the Federal Reserve’s tightening cycle was over. The FX markets this week will focus on second-tier US data and the release of minutes from the 1 November FOMC meeting.
- Boston Federal Reserve President Susan Collins expressed optimism that the U.S. central bank can lower inflation without causing substantial damage to the job market by taking a “patient” approach to any further interest rate moves. This sentiment is shared by a growing number of Fed officials, leading many analysts to believe that the Fed is likely finished raising rates.
Global Economic Updates
- In Germany, producer price inflation increased to -0.10% in October from -0.20% in September of 2023.
- In Argentina, libertarian candidate Javier Milei won the presidency with a platform of shrinking the government and potentially dollarizing the economy.
- The euro received a boost when Moody’s Investors Service raised the outlook for Italian sovereign debt to stable from negative and increased Portugal’s ratings by two notches.
- In the UK, retail sales volumes fell unexpectedly in October due to stretched consumer finances, leading investors to believe that the Bank of England will lower interest rates next year. As the UK heads into an election year, the Chancellor is considering ways to reduce taxes, which could be good news for sterling.
China’s Economic Measures
- China’s central bank and financial regulators pledged to ensure financing support for the property sector and to work together to resolve local government debt risks. Chinese leaders are trying to revive the economy and fend off potential financial risks from a property slump and 92 trillion yuan ($12.77 trillion) in local government debt.
Crude Oil Market
- Crude oil markets will be closely watching developments related to OPEC+ as the group is set to meet in Vienna to discuss output policy. Recent drop in oil prices makes more likely that Saudi Arabia will extend their extra voluntary reduction. This move is expected to help eliminate the anticipated surplus and offer some support to the market.