Over the weekend we got some tentative dialling back of threats from Iran and Hezbollah as an Iranian ambassador told a journalist that “Iran’s armed forces will not engage Israel provided it does not dare to attack Iran, its interests and nationals”, while a Hezbollah spokesperson said that “Sunday’s increase in the intensity of the exchanges doesn’t indicate Hezbollah has decided to fully enter into the Hamas-Israel war. The fighting on the border is “only skirmishes” and represents a “warning”. Moreover, the Palestinian Authority President Mahmoud Abbas said that the actions of Hamas do not represent Palestinian people. This has led to some positive risk sentiment creeping into the new week. ECB President Lagarde (neutral – voter) acknowledges that the ECB will be patient at this point in time but remains vigilant of inflation risks around the labour market and the oil market: The New Zealand Services PMI bounced back into expansion: BoE Governor Bailey (neutral – voter) signalled that rates are likely to remain at the current level as the BoE is ready to be patient and wait for the tighter monetary policy to feed through the economy: The PBoC left the MLF rate unchanged at 2.5% as expected. BoE’s Pill (neutral – voter) remains wary of persistently higher inflation but acknowledges that the BoE has done a lot on interest rates already and wage growth could decelerate: Fed’s Harker (neutral – voter) reiterates that the Fed is likely done with interest rates increases and it should now be patient: The BoC Business Outlook Survey indicator fell further into negative territory at -3.51% vs. -2.31% prior. : ECB’s Lane (dove – voter) acknowledges the uncertainty that the ECB needs to navigate but reaffirms that the central bank will keep interest rates at the current level for some time: The New Zealand CPI missed expectations: The RBA released the Minutes of its October Monetary Policy Meeting: The UK September labour market report was only partial as the ONS delayed some of the data to the next week due to falling response rates: The German October ZEW survey beat expectations although it remains deeply negative: The Canadian CPI data missed expectations across the board which lowered the risk of another rate hike from the BoC next week: The US September Retail Sales beat expectations by a big margin with positive revisions to the prior figures: The US NAHB Housing Market Index missed expectations as it continues to fall given the surge in long term yields: Fed’s Barkin (neutral – non voter) sees clear progress on inflation and once again we hear a comment about long term yields doing the job for the Fed: Late in the evening a rocket hit a hospital in Gaza killing hundreds of people and sparking a global outrage. It’s not yet clear who is responsible for the bombing as Israel and Hamas trade blame as with Hamas blaming Israeli airstrikes and Israel saying that it was a failed rocket launch by the Palestinian Islamic Jihad group. Following this unfortunate episode though, that was scheduled between the US President Biden, the Palestinian President Abbas and the Egyptian President al-Sisi in Amman. ECB’s Holzmann (hawk – voter) remains wary of further shocks that might require additional hikes: RBA Governor Bullock is worried about supply shocks but acknowledges that we haven’t yet seen the full impact of past rate hikes: The Chinese Q3 GDP beat expectations: The Chinese Industrial Production Y/Y beat expectations coming in at 4.5% vs. 4.3% expected and 4.5% prior. The Chinese Retail Sales Y/Y beat expectations coming in at 5.5% vs. 4.9% expected and 4.6% prior. The UK CPI slightly beat expectations but it’s unlikely to change the current BoE’s “wait and see” stance: ECB’s Visco (dove – voter) is wary of second-round effects keeping underlying inflation above the ECB’s 2% target: Fed’s Harker (neutral – voter) reaffirmed his preference for keeping rates steady: Fed’s Waller (neutral – voter) acknowledges the improvements on the inflation front without too much damage to the economy and leans towards keeping rates higher for longer rather than increasing rates further: Fed’s Williams (neutral – voter) just acknowledges the improvements on the inflation front and reaffirms the commitment to keep at it until the job is done: Fed’s Bowman (hawk – voter) didn’t offer much on the policy outlook, although she remains the most vocal member supporting another rate hike: The Fed’s Beige Book basically showed a stable economy with inflation and labour market tightness easing: The Australian jobs report missed expectations as the labour market continues to soften: The Canadian PPI beat expectations: The US Initial Claims beat expectations once again, but Continuing Claims missed for the second time in a row suggesting that workers are finding it harder to get another job after being laid off: The Conference Board Leading Economic Index for September fell -0.7% vs. -0.4% expected and -0.4% prior (revised from -0.5%). This is the 18 monthly decline in a row. Fed Chair Powell (neutral – voter) delivered a very comprehensive speech and the tl;dr is that the Fed wants to see more data before increasing rates again especially given the rise in long term yields: ABS News reported that the Israeli Military has received the “green light” to move into Gaza whenever it’s ready as tensions in the Middle East intensify. Fed’s Goolsbee (dove – voter) just stated the obvious: Fed’s Bostic (dove – non voter) doesn’t see signs of a wage-price spiral: Fed’s Harker (neutral – voter) reiterates the Fed’s “wait and see” stance: Fed’s Logan (hawk – voter) welcomes the rise in long term yields: The Japanese CPI continues to ease but the Core-Core indicator still hovers around cycle highs: The PBoC left the Loan Prime Rates (LPR) unchanged as expected: BoE Governor Bailey (neutral – voter) expects inflation to fall markedly next month and the tone suggests that he leans towards a pause at the upcoming rate decision: The UK September Retail Sales missed across the board by a big margin: BoJ Governor Ueda didn’t offer much on the policy outlook: The Canadian August Retail Sales slightly beat expectations with the advance estimate pointing to a flat reading for September: That’s all folks. Have a great weekend!

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