Weekly Market Outlook (October 30-04) | Forexlive

UPCOMING EVENTS:

• Monday: Japan Industrial Production and Retail Sales, Chinese PMIs, German CPI, Fed Chairman Powell. (Canada on vacation)
• Tuesday: Japan Unemployment Rate, BoJ Opinion Summary, Australian Retail Sales, Swiss Retail Sales, Swiss Manufacturing PMI, Eurozone Flash CPI, Canadian Manufacturing PMI, US ISM Manufacturing PMI, US Jobs . (China on vacation)
• Wednesday: Japan’s Tankan Index, Eurozone Unemployment Rate, US ADP. (China on vacation)
• Thursday: Swiss CPI, Eurozone PPI, US Jobless Claims, Canadian Services PMI, US ISM Services PMI. (China on vacation)
• Friday: Swiss unemployment rate, US NFP. (China on vacation)

Tuesday

Eurozone CPI Y/Y is expected at 1.9% vs. 2.2% previously, while Core CPI Y/Y is seen at 2.8% vs. 2.8% previously. The market has already set for a 25bps back-to-back cut in October following weak PMIs and weak CPI numbers from France and Spain last week. The ECB is expected to cut by 25bps at each meeting until June 2025.

US ISM Manufacturing PMI is expected at 47.5 from 47.2 previously. This and the NFP report will be the most important economic releases this week. The S&P Global PMI last week showed the manufacturing index falling further into contraction.

Those PMIs and perhaps even the ISM PMIs are unlikely to have incorporated the latest Fed decision. However, the ISM data is collected in the last week of the month, so there could be some improvement compared to the S&P Global report.

Given the focus on global growth following Fed and especially PBoC decisions, the market could be fine with a benign number and encourage a strong rebound.

The New Orders index should be the one to watch as it should be the first to respond to recent developments. The focus will also be on the employment index ahead of Friday’s NFP report.

U.S. job openings are expected at 7.670 million from 7.673 million previously. The last report surprised on the downside with a big drop. However, the hiring rate improved slightly, while the layoff rate remained low. It is a labor market where it is currently difficult to find a job, but also low risk of losing it. We will see in the coming months how it evolves following recent developments.

Thursday

Switzerland’s Y/Y CPI is expected at 1.1% vs. 1.1% previously, while the M/M figure is seen at -0.1% vs. 0.0% previously. As a reminder, the SNB last week cut interest rates by just 25 bps, taking the policy rate to 1.00%, and said it was ready to intervene in the foreign exchange market if needed.

The central bank also revised its inflation forecasts significantly lower, leading the market to price in more rate cuts beyond December 2024. Despite this, the Swiss franc strengthened as the market viewed a weak move as likely.

US jobless claims continue to be one of the most important releases to follow each week as it is a more timely indicator of the state of the labor market.

Initial Claims remain in the 2022-created 200K-260K range, while Continuing Claims after rising sustainably over the summer have improved considerably in recent weeks.

This week, initial claims are expected at 220,000 from 218,000 previously, while there is no consensus for continuing claims at the time of writing, although the previous edition showed an increase to 1834,000.

US ISM Services PMI is expected at 51.6 from 51.5 previously. This poll hasn’t given any clear signal lately as it stretches back to 2022 and has been quite unreliable. The market might focus only on the employment index before the NFP report the next day.

The recent S&P Global Services PMI noted that “early survey indicators for September point to an economy continuing to grow at a solid pace, albeit with a weakened manufacturing sector and heightened political uncertainty acting as substantial headwinds.”

“The sustained and robust manufacturing expansion reported by the September PMI is consistent with a healthy 2.2% annual GDP growth rate in the third quarter. But there are some flashing warning lights, particularly around reliance on the services sector for growth, as manufacturing remained in decline and business confidence worrisomely low.”

“Meanwhile, a re-acceleration in inflation is also being signaled, suggesting that the Fed may not completely shift its focus away from its inflation target as it tries to support the economic recovery.”

Friday

The US NFP report is expected to show 140,000 jobs added in September from 142,000 in August and the unemployment rate unchanged at 4.2%. Average hourly gain Y/Y is 3.8% vs. 3.8% previously, while the M/M figure is 0.3% vs. 0.4% previously.

The Fed projected an unemployment rate of 4.4% by the end of the year, with 50 bps of easing. The unemployment rate in 2024 rose due to increased labor supply rather than more layoffs, which is something jobless claims captured well.

The market is setting a 53% probability of another 50bps cut in November and this could very well rise if the NFP report is weak. Of course, the opposite is true if the labor market report comes in better than expected, with a 25 bps cut becoming the most likely move.