The broad-based dollar rally continued against the majors. CHF, NOK, and CAD outperformed while JPY, NZD, and AUD underperformed. Data this week are expected to show continued strength in the U.S. economy, although some labor market readings will be distorted by the hurricanes and strikes. If so, the dollar should continue to climb.

AMERICAS

Recent data have supported the global divergence theme. October PMIs saw Japan slip below 50, the U.K. drop sharply, and Europe and Australia remaining below 50. With much of the world clearly slowing, the U.S. economy continues to power on. After the dollar ended last week on a firm note, key data this week should keep the rally going. Indeed, the dollar is looking to extend its streak of four straight weeks of gains.

The October jobs report Friday will be the data highlight. Bloomberg consensus for NFP is 110k vs. 254k in September, while its whisper number stands at 130k. This would be well below the average monthly gain of 203k over the prior twelve months. However, the jobs report will be hard to interpret as it will be affected by the two recent hurricanes as well as the strike at Boeing. Fed Governor Waller said he expects these factors to reduce employment growth by more than 100,000 in October, and there may also be an effect on the unemployment rate, which is expected to remain steady at 4.1%. Ahead of that, ADP reports its private sector jobs estimate Wednesday and is expected at 110k vs. 143k in September.

We get other key labor market readings. September JOLTS data will be reported Tuesday and openings are expected at 7.935 mln vs. 8.040 mln in August. The openings rate rose to 4.8 in August, further above the 4.5 level that typically signals a sharply higher unemployment rate. Elsewhere, the ratio of vacancies to unemployed was 1.1 in August, which is historically pretty strong as that ratio has been above 1 only three times since 1960. We expect the data to remain consistent with a labor market soft-landing.

October Challenger layoffs and Q3 Employment Cost Index will be reported Thursday. ECI is expected to rise 0.9% q/q, same as in Q2. This is the Fed’s favorite wage data because it’s more comprehensive and controls for changes in the composition of employment. On an annual basis, ECI wages & salaries eased from a high of 5.3% in Q2 2022 to 4.2% in Q2 and will likely remain sticky above 4% in Q3 as average hourly earnings and the Atlanta Fed wage growth tracker both increased in September by 0.1 ppt to 4.0% y/y and 4.7% y/y, respectively.

September PCE data Thursday will also be important. Headline is expected to fall a tick to 2.1% y/y, while core is expected to fall a tick to 2.6% y/y. Of note, this lines up exactly with the Cleveland’s Fed’s Nowcast model. Looking ahead, that model sees headline and core both rising a tick in October to 2.2% and 2.7%, respectively. There are no Fed speakers this week due to the media blackout ahead of the November 7-8 FOMC meeting. However, many Fed officials remain cautious about the inflation outlook.

Personal income and spending will be reported at the same time. Income is expected at 0.3% m/m vs. 0.2% in August, while spending is expected at 0.4% m/m vs. 0.2% in August. Real spending is expected at 0.3% m/m vs. 0.1% in August. Of note, the control group in retail sales data used for GDP calculations surged 0.7% m/m in September after rising 0.4% in August. As long as jobs are being created, consumption is likely to remain fairly robust.

October Conference Board consumer confidence will be reported Tuesday. Headline is expected at 99.3 vs. 98.7 in September. If so, it would remain roughly within the same narrow range that’s held throughout the past two years. Of note, gasoline prices are the lowest since February and should push consumer confidence higher. Positive real wage growth, encouraging labor demand, and strong household balance sheets suggest household spending will remain an important tailwind to GDP growth.

We get our first read of Q3 GDP Wednesday. Growth is expected at 3.0% SAAR, same as the final Q2 reading, while personal consumption is expected at 3.2% SAAR vs. 2.8% in Q2. Of note, the Atlanta Fed’s GDPNow model is tracking Q3 growth at 3.3% SAAR and the final update will come Tuesday. Its initial forecast for Q4 will come Thursday. Elsewhere, the New York Fed’s Nowcast model is tracking Q3 growth at 2.9% SAAR and Q4 growth at 2.5% SAAR. Its Q4 forecast will be updated Friday, while its initial forecast for Q1 2025 will come at the end of November.

October ISM manufacturing PMI will be reported Friday. Headline is expected at 47.6 vs. 47.2 in September. Keep an eye on employment and prices paid. Ahead of that, Chicago PMI will be reported Thursday and is expected at 47.0 vs. 46.6 in September. However, this series has not been tracking well with the national PMI readings for the past couple of years and so offers little insight. Of note, the S&P Global U.S. manufacturing PMI rose to a 2-month high of 47.8 vs. 47.3 in September.

Canada highlight will be August GDP Thursday. Consensus sees real GDP growth of 0.1% m/m in August vs. 0.2% in July, while Statistics Canada estimates real GDP to be essentially unchanged in August. Soggy economic activity, slower inflation, and growing slack in the labor market leave plenty of room for the Bank of Canada to keep cutting the policy rate. The market is pricing in almost 50% odds of a follow-up 50 bp cut in December.

EUROPE/MIDDLE EAST/AFRICA

Eurozone CPI data for October will be reported. Spain and Germany report Wednesday. Spain’s EU Harmonised inflation is expected to rise a tick to 1.8% y/y, while Germany’s is expected at 2.1% y/y vs. 1.8% in September. Spain is one of the only eurozone countries to report core inflation and is expected to fall a tick to 2.3% y/y. France and Italy report Thursday. France’s EU Harmonised inflation is expected to pick up a tick to 1.5% y/y, while Italy’s is expected to pick up two ticks to 0.9% y/y. Eurozone also reports Thursday. Headline is expected at 1.9% y/y vs. 1.7% in September, while core is expected at 2.6% y/y vs. 2.7% in September.

European Central Bank officials have been trying to manage market easing expectations. The disinflation process should allow the bank to continue cutting rates gradually. However, the market is pricing in 40% odds of a jumbo 50 bp cut in December. Wunsch speaks Monday. Schnabel, Villeroy, and Nagel speak Wednesday. Panetta and Escriva speak Thursday.

Eurozone reports Q3 GDP data Wednesday. GDP is expected to grow 0.2% q/q vs. 0.2% in Q2, while the y/y rate is expected at 0.8% vs. 0.6% in Q2. Looking at the country breakdown, Germany is expected at -0.1% q/q vs. -0.1% in Q2, France is expected at 0.3% q/q vs. 0.2% in Q2, Italy is expected at 0.2% q/q vs. 0.2% in Q2, and Spain is expected at 0.6% q/q vs. 0.8% in Q2. Germany remains the weak link, although recent data suggest France is likely to follow in its footsteps.

U.K. Chancellor Reeves presents the autumn budget Wednesday. Ahead of that, U.K.-German 10-year government bond yield spreads have widened to the highest since August 2023. Investors fear the government will fund increased investment spending with higher debt issuance after confirming tweaks to budget rules to include government assets in the U.K.’s measure of debt. The greater risk premium on gilts is a drag on GBP, especially on the crosses. MCP member Breeden also speaks Wednesday.

Switzerland reports October CPI data Friday. Headline is expected to remain steady at 0.8% y/y, while core is expected to remain steady at 1.0% y/y. The lack of price pressures has the market looking for aggressive SNB easing ahead. The market is currently pricing in 55% odds of a jumbo 50 bp cut at the December meeting. Overall, a total of 75 bp of easing is priced in over the next six months that would see the policy rate bottom near 0.25%.

ASIA

Early results suggest the LDP and its coalition lost their majority in the lower house. NHK projects that the LDP and Komeito together will win 210 seats while main opposition Constitutional Democratic Party of Japan will win 145 seats. Both fall short of the 233 seats needed for a majority and so we are in for a period of horse-trading. As the largest party, the LDP will try to widen its coalition but so far, no other party has shown any willingness to join. Elsewhere, CDP leader Noda said he would try to form a government. Either way, more parties mean more instability. Even if the LDP hangs onto power, it will become much more difficult for Prime Minister Ishiba to move forward with fiscal and monetary tightening. Some observers also feel that Ishiba will be severely weakened as LDP leader and may be challenged ahead of upper house elections scheduled for next year. Stay tuned.

The two-day Bank of Japan meeting ends Thursday with a widely expected hold. Recent comments from Ueda suggest there will be no change in policy at this meeting and so the focus will be on the BOJ’s policy guidance. We expect the BOJ to signal again that it’s in no rush to remove policy accommodation, which would further weigh on JPY. Japan economic growth is unimpressive, underlying inflation is in a firm downtrend, and BOJ officials continue to caution about unstable financial markets. Updated macro forecasts will be published in the Outlook Report, and we see downside risks.

Key real sector data for September will be reported. Labor market data will be reported Tuesday. Unemployment is expected to remain steady at 2.5%, while the job-to-applicant ratio is expected to remain steady at 1.23. The labor market has remained relatively tight but there are really no wage pressures to speak of.

Retail sales, IP, and housing starts will be reported Thursday. Sales are expected at 2.1% y/y vs. 3.1% in August, IP is expected at -3.2% y/y vs. -4.9% in August, and starts are expected at -4.3% y/y vs. -5.1% in August. Given the shocking drop in the October composite PMI to 49.4, we expect the hard data to show further weakness in the coming months.

Australia highlight will be CPI data Wednesday. September headline is expected at 2.3% y/y vs. 2.7%, while Q3 headline is expected at 2.9% y/y vs. 3.8% in Q2. Looking at the Q3 core measures, trimmed mean is expected at 3.5% y/y vs. 3.9% in Q2 and weighted median is expected at 3.6% y/y vs. 4.1% in Q2. The sharp slowdown in headline CPI inflation will reflect the government’s cost-of-living subsidy measures. The market sees just 25% odds of a 25 bp cut by December. We think the market is underpricing this risk as underlying economic activity is weak and points to lower inflation pressures. The CPI data will either support our view or ensure the RBA continues to buck the global easing trend.

Retail sales data Thursday will also be important. September sales are expected at 0.3% m/m vs. 0.7% in August, while Q3 real sales are expected at 0.5% q/q vs. -0.3% in Q2. Going forward, the CBA Household Spending Indicator points to subdued spending growth.

October ANZ business confidence will be reported Thursday. In September, the business confidence and activity outlook indexes both rose sharply to over ten-year highs of 60.9 and 45.3, respectively. Reported past activity, which has the best correlation to GDP, remains very weak but rose from -23 to -18.5, suggesting the downturn in economic activity will be short-lived. After slashing rates 50 bp to 4.75% in October, the RBNZ noted that “economic activity in New Zealand is subdued, in part due to restrictive monetary policy.” Indeed, the policy rate is above the RBNZ’s estimate for the nominal neutral rate range of 2-4%. The implication is the RBNZ has scope to deliver additional jumbo rate cuts, which would be an ongoing drag on NZD. The market has fully priced in a 50 bp policy rate cut in November and sees 25% odds of a larger 75 bp move.