The dollar put in a mixed performance against the majors last week. NOK, AUD, and CAD outperformed while EUR, SEK, and CHF underperformed. With President-elect Trump likely to follow through with his plans to enact significant tariffs, we expect the inflationary impulses will keep the Fed from cutting rates as much as they otherwise would have, which should boost the dollar. Bottom line: we believe the so-called Trump Trade remains intact.

AMERICAS

The Fed made it clear it was in no hurry to cut rates. As a result, the market is pricing in only 65% odds of a follow-up cut in December via Fed Funds futures and less than 50% odds in the swaps market. Those odds will evolve in the coming weeks. Before the next FOMC meeting December 17-18, we get one more jobs report and two more CPI, PPI, and retail sales reports. Fed officials are likely to reinforce the cautious tone this week. Waller, Barkin (twice), Kashkari, and Harker speak Tuesday. Kashkari, Williams, Logan, Musalem, and Schmid speak Wednesday. Kugler, Barkin, Powell, and Williams speak Thursday. Collins and Williams speak Friday.

Growth remains solid in Q4. The Atlanta Fed GDPNow model's estimate for Q4 GDP stands at 2.5% SAAR and will be updated Friday after the data. Elsewhere, the New York Fed’s Nowcast model is tracking Q4 growth at 2.1% SAAR and will also be updated Friday, while its initial forecast for Q1 2025 will come at the end of November. Bottom line: the US economy continues to grow at or above trend as we move into 2025.

October retail sales Friday will be key. Headline is expected to fall a tick to 0.3% m/m while ex-autos is expected to slow two ticks to 0.3% m/m. The so-called control group used for GDP calculations is expected to slow four ticks to 0.3% m/m. Overall, consumer spending is supported by positive real wage growth, a healthy labor market, and strong household balance sheets. October business inventories and industrial production are also reported Friday.

October inflation data will also be important. CPI will be reported Wednesday. Headline is expected to pick up two ticks to 2.6% y/y while core is expected to remain steady at 3.3% y/y. Consensus is in line with the Cleveland Fed’s Nowcast model. Looking ahead to November, that model sees headline and core at 2.7% and 3.3%, respectively. While inflation has eased significantly over the past two years, the Fed is more cautious about the inflation outlook as its FOMC statement last week scrapped the previous reference that it had gained greater confidence that inflation is moving sustainably toward 2%.

PPI will be reported Thursday. Headline is expected to pick up half a point to 2.3% y/y while core is expected to pick up two ticks to 3.0% y/y. Watch out for PPI services ex-trade, transportation, and warehousing, as it feeds into the core PCE calculations. Another sticky print above 4% y/y poses an upside risk to PCE inflation.

Fed Q3 Senior Loan Officer Opinion Survey will be reported Tuesday. In Q2, the SLOOS showed the net share of banks reporting tighter lending standards were lower than in Q1 across almost all loan categories. We expect this trend to continue in Q3, as the September FOMC meeting noted that credit remained generally accessible to most corporate and consumer borrowers.

New York Fed inflation expectations for October will also be reported Tuesday. Just as inflation readings have flattened out a bit, so too have inflation expectations.

EUROPE/MIDDLE EAST/AFRICA

European Central Bank releases the account of its October meeting Thursday. At that meeting, the bank cut rates 25 bp for the second straight meeting but stuck to its data-dependent guidance reiterating it “is not pre-committing to a particular rate path.” However, the bar for additional ECB easing is low as the ECB noted “the disinflationary process is well on track” while President Lagarde reiterated that risks to economic growth are tilted to the downside. Moreover, Lagarde confirmed the decision to was unanimous and highlighted there was more downside than upside risks to inflation. The swaps market is now pricing in 150 bp of ECB easing over the 12 twelve months that would see the policy rate bottom near 1.75%. Rehn, Centeno, and Cipollone speak Tuesday. Guindos and Schnabel speak Thursday. Lane, Cipollone, and Guindos speak Friday.

November German ZEW survey will be reported Tuesday. Expectations are expected to rise a tick to 13.2 while current assessment is expected at -85.0 vs. -86.9 in October.

The Bank of England also made it clear that it is in no rush to cut rates. After cutting rates 25 bp last week, it reiterated “a gradual approach to removing policy restraint remains appropriate. Monetary policy will need to continue to remain restrictive for sufficiently long.” The BOE also warned that the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP and CPI inflation. The market responded by slashing in half the probability of a 25 bp cut in December to about 20% while the OIS curve still sees the policy rate bottoming at 4.00% over the next 12 months. In contrast, the market anticipates the ECB policy rate to bottom at around 1.75% over the same timeframe and so the relative monetary policy trend supports a lower EUR/GBP. Pill speaks Tuesday, Mann speaks Wednesday. Mann and Bailey speak Thursday.

U.K. labor market data will be reported Tuesday. The labor market has continued to ease but remains relatively tight by historical standards. Average weekly earnings ex-bonuses are expected to fall two ticks to a 27-month low of 4.7% y/y, while the unemployment rate is forecast to rise one tick to 4.1% in the three months through September. Over Q3, the Bank of England projects average weekly earnings private sector regular pay of 4.8% y/y and the unemployment rate to average 4.2%.

Q3 GDP and September real sector data will be reported Friday. Consensus and Bank of England both see growth of 0.2% q/q in Q3 vs. 0.5% in Q2. Q3 GDP growth is expected to be driven by household consumption and business investment. Risks to Q3 GDP growth are skewed to the downside after the S&P Global/CIPS UK composite PMI weakened in October to 51.8, the lowest level since November 2023.

Norway reports October CPI data Monday. Headline is expected at 2.4% y/y vs. 3.0% in September, while underlying is expected at 2.7% y/y vs. 3.1% in September. If so, headline would be the lowest since December 2020. Inflation is tracking below the Norges Bank’s forecast, but the bank is in no rush to loosen policy in part because of the depreciation in the krone. At its November 6 meeting, the Norges Bank kept rates steady at 4.5%, as expected, and reiterated that “the policy rate will remain at 4.5% to the end of 2024.” It also noted that the economic outlook is tracking the forecasts presented in the September Report, which indicated a gradual reduction in the policy rate from the first quarter of 2025. The swaps market is pricing in about 100 bp of easing over the next 12 months, which would take the policy rate down to 3.5%. The Norges Bank anticipates the policy to reach 3.5% a little later in Q1 2026.

Riksbank minutes from November 7 meeting will be released Wednesday. At that meeting, the Riksbank cut rates 50 bp to 2.75%, as expected. The bank noted that “the policy rate may be cut again at the next monetary policy meeting in December and during the first half of 2025, in line with what was communicated in September.” The market is pricing in about 100 bp of further easing over the next 12 months, which would see the policy rate bottom near 1.75% vs. the Riksbank’s 2.25% forecast. In our view, there is room for market pricing to converge towards the Riksbank’s forecast because underlying inflation is stabilizing around the 2% inflation target. Its Financial Stability Report is published Thursday.

ASIA

Bank of Japan releases its summary of opinions for the October 30-31 meeting Monday. At that meeting, the bank delivered the widely expected hold and reiterated its cautious tightening bias that if the “outlook for economic activity and prices will be realized, the Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation.” However, Governor Ueda suggested that the bar for the BOJ to resume normalizing policy is low. Ueda acknowledge that markets have slowly regained stability and risks related to the U.S. economy are lower than before. Previously, Ueda warned of ongoing financial instability in the market. Macro forecasts were largely unchanged, though the BOJ cut its core inflation forecast for FY25 two ticks to 1.9%, which is below the 2% inflation target. There has been a slight upward shift in market expectations. Odds of a December hike have risen to 45%, while the odds of a January hike have risen marginally to around 80%. However, the next hike still doesn’t become fully priced in until May, which is not any different from before the meeting. Only 40 bp of total tightening is seen over the next 12 months.

Japan data highlight will be Q3 GDP Friday. Real GDP is expected to rise 0.2% q/q vs. 0.7% in Q2. High-frequency data, like the compositive PMI, point to downside risk to growth. For reference, the Bank of Japan projects real GDP growth of 0.6% for fiscal 2024.

September current account data Monday will also be of interest. The adjusted surplus is expected at JPY2.982 trln vs. JPY3.017 trln in August. However, the investment flows will be of more interest. The August data show that Japan investors were net buyers of U.S. bonds (JPY5.593 trln) for the second straight month and at a record amount. Japan investors stayed net buyers (JPY78.9 bln) of Australian bonds for the third straight month and also stayed net buyers of Canadian bonds (JPY42.8 mln) for the third straight month. Investors became net buyers of Italian bonds (JPY27.3 bln) after two straight months of net selling. Overall, Japan investors became a total net buyers of foreign bonds (JPY7.450 trln) and was the most since September 2007. With the uptrend in Japan yields interrupted by the BOJ’s dovish pivot, it seems likely that Japan investors will continue chasing higher yields abroad.

Australia highlight will be October jobs data Thursday. Consensus sees 25k jobs added vs. 64.1k in September, while the unemployment is seen steady at 4.1% on an unchanged participation rate of 67.2%. The RBA’s view is that “further falls in vacancies can still occur alongside a relatively modest increase in the unemployment rate,” suggesting it’s in no hurry to start easing. RBA Governor Bullock speaks Thursday.

Australia Q3 wage price index Tuesday will also be important. Nominal wage growth is expected at 0.9% q/q vs. 0.8% in Q2, while the y/y rates is expected to fall half a point to 3.6% y/y on easing labor market conditions. The RBA projects wage growth of 3.4% y/y by December 2024. Nonetheless, the pace of nominal wage growth remains high relative to productivity growth (0.8% y/y in Q2) and could put upward pressure on inflation. Markets don’t full pricing in the first full 25 bp cut until May 2025.