Week of NOVEMBER 10

Last week, markets awaited the BOE's rate decision after the RBA kept rates unchanged, with the markets turning to private ADP for a measure of the US jobs market.

The week ahead is relatively quiet on the data front, with the UK taking centre stage as it announces jobs and inflation figures.

Week in Review

Last week, the US government shutdown became the longest in history, with few signs that either side was ready to reach a compromise. Markets settled into a new normal, focusing on the data while equities trended lower amid rising concerns that the AI bubble might burst.

Traders were forced to rely on private data measures to gain insights into the US economy, as the usual release of NFP in the first week of the month was suspended due to the government shutdown. Those measures provided a mixed picture. The ADP payroll data showed a gain of 42K jobs, above the 20K forecast. However, a day later, Challenger said that there had been 153.1K jobs lost in October, a 183% increase over the month before. Job cuts at tech firms were the most significant component, attributed to the disruptive effect of AI. The ISM manufacturing PMI unexpectedly fell further into contraction, to 48.7, compared to 49.1 a month earlier.

The BOE kept rates unchanged, as was expected, with a 5-4 vote. The unexpectedly high number of dissenting votes to cut has left the market with a distinctly dovish impression. Governor Andrew Bailey signalled more easing in the future by underscoring expectations that inflation pressures will ease. Ahead of the meeting, Chancellor Rachel Reeves delivered an unusual speech ahead of the autumn budget, emphasising the need for "tough choices". Many analysts interpreted it as laying the groundwork for a tax hike.

The RBA kept rates unchanged, as was widely anticipated, but surprised markets with a more hawkish tone. The policy statement noted that inflation had increased above target and stated that the jobs market was healthy.

China's October trade balance remained unchanged, instead of rising as anticipated. The surprise was a sudden slowdown in trade growth. Exports fell -1.1% instead of growing 3.8% as expected. Imports increased by just 1.0% instead of the 3.6% anticipated.

In geopolitics, the US Supreme Court held oral arguments on President Donald Trump's "reciprocal" tariffs. Tough questions from conservatives gave the impression that the Supreme Court may take an unfavourable stance, with the odds of rescinding the tariffs rising to 80%. However, White House officials played down the possibility. The ruling is expected later in the year, with the administration reportedly having alternative tariff plans in place.

Biggest Market Movers

• Crude prices trended lower through the week after US inventories grew more than expected and OPEC+ discussed another production increase.
• The NZD was the worst-performing major currency amid a soft economic situation. Acting RBNZ Governor Christian Hawksby conveyed a dovish stance by expressing concern over the labour market.
• The yen was the best performer against a rising dollar amid risk-off sentiment.
• Nikkei trended lower, affected by general market aversion to high-valuation tech stocks, which also weighed on the Nasdaq.

Top Events in the Week Ahead

If it weren't for the US government shutdown, markets would have expected key data figures, including inflation and retail sales. In the absence of the official releases, markets might focus on continuing negotiations to end the shutdown.

UK Data Barrage Ahead of Budget

Britain will offer two data dumps on Tuesday and Thursday, which could shake up sterling. The key figure in focus is likely to be the unemployment figure, which is forecast to fall to 4.7% from 4.8% a month earlier. Coming so close on the heels of the BOE rate decision, the data could have a muted effect. However, a substantial tightening of the British jobs market might leave the market less optimistic about a rate cut in December. The UK's quarterly GDP could have a bigger impact, as it may influence the Autumn Budget. The consensus is for the UK to manage 0.3% growth in Q3, which would match the prior quarter. September GDP is also projected to accelerate to 0.2% growth, which might indicate that the economy is finally starting to recover, supporting more tax revenue. If prices continue to move further away from 1.3000, the cable could rise to 1.3200 if it breaks above 1.3150. However, if the local support at 1.3000 fails, the pound could drop to 1.2900 or lower.

Commodity Currencies Look to China Data

The coming week sees a host of second-tier data from China that could provide some insight into how the world's largest commodity consumer is faring. On Sunday, the release of Chinese inflation is expected to show a decline back into deflation, at -0.1% compared to +0.1% the previous month, giving the central government room to step up stimulus if needed. China's loan growth is expected to be reported on Tuesday, with a slight slowdown to 6.4% from 6.6% previously. And finally, on Friday, China's retail sales are expected to slow to 2.2% annual growth from 3.0% the previous year, potentially indicating softer domestic demand. Aussie failed to reclaim 0.6500, bringing into focus the regional support of 0.6439. Positive data from China, however, could boost the currency to 0.6550.

Other Events and Earnings

Monday features the BOJ's Summary of Opinions report. Tuesday sees the release of Australia's Westpac consumer confidence and NAB business confidence. The final reading of the German October CPI is scheduled for Wednesday. Thursday includes Australia's unemployment rate.  For Friday, the EU's second GDP reading is on the docket. Earnings season will wind down through the course of the week. Still, several prominent names are on the docket, including Barrick, Flutter, Cisco, Walt Disney, Applied Materials, Vodafone, and Rolls-Royce.