Market Outlook for the Week of November 7-11 | Forexlive

It’s going to be a
light week ahead in terms of economic events as is usual after the NFP. There
are no notable economic events on Monday, but Tuesday SNB Chairman Jordan will
deliver a speech at the High-Level Conference on Global Risk, Uncertainty, and
Volatility, in Zurich.

This type of event is
not generally supposed to create volatility in the market, but the SNB is known
for its ability to surprise, so it’s worth keeping an eye out for any remarks
about monetary policy in Jordan’s address.

SNB continued its
tightening cycle and hiked the rate to 0.50%, out of negative territory. The
inflation rate in Switzerland is above target but didn’t rise alarmingly high
compared to other developed countries. Additional rate hikes are expected in
the future.

Also, on Tuesday we
have the U.S. midterm elections. According to FiveThirtyEight estimations
there’s an 80% probability the Republicans will take control of the House. The
Democrats could maintain control of the Senate.

If this happens,
passing legislation could be difficult for the next two years. Bank of America
suggests that a Republican win suggests that the electorate wants low
inflation, while a Democrat win will signal a desire for low unemployment.

The most important
event of the week will be the inflation data for the U.S. on Thursday, and it
will also be important to watch the unemployment claims. On Friday, we’ll have
the GDP data for the U.K. and the Prelim UoM consumer sentiment in the U.S.
Some Fed members are expected to deliver their remarks over the week.

Last week the nonfarm
payrolls surprised again and rose 261K indicating that the labour market is
still tight. The rise was especially in healthcare, professional and business
services, and manufacturing.

In the construction
sector the employment was flat despite the fact that real estate was negatively
influenced lately. In the near future, job growth is expected to cool down, but
the FOMC will keep tightening policy even if at some point the pace of
tightening will slow down.

Some analysts expect
the Fed to hike the rate by 50bps at the next meeting in December, but hot
inflation data could force another 75bps hike, so this week’s CPI data is very
important. The FOMC said for the first time that it will take into account the
cumulative amount of tightening when deciding future moves which could point to
a slower pace of tightening.

The CPI y/y for
October is expected to print lower to 8% from 8.2%, but the monthly gain is
expected to print above expectations. It’s likely that core inflation data will
see some relief but will remain above target.

On Friday the
consumer sentiment data in the U.S. could reflect pessimism, with consumers
concerned about high inflation and recession risks. The University of Michigan
Consumer Sentiment index is at a historical low level and Citi analysts expect
a further modest decline in November to 59.6 from 59.9.

The GDP data in the
U.K. is not yet expected to show improvement. The consensus is that the economy
likely contracted 0.4% q/q in Q3 making the U.K. one of the most affected
economies among developed countries with recession possibly being under way
already. The BoE will continue to fight against inflation and keep rising
rates, but analysts from Wells Fargo believe the
BoE will likely not tighten to the extent that’s currently priced by markets,
meaning the pound will remain under depreciation pressures for the foreseeable
future.

USD/CAD
expectations