- Takeaways from the US last week: The FOMC decided to leave interest rates unchanged ( as expected) for the second straight meeting, between 5.25%-5.5%; Fed Chair Jerome Powell Speech after the decision was surprisingly dovish given the surprises in inflation and economic data prior to the meeting (mostly due to seasonality); US Jobs data released on Friday showed a strong cooling – Non-Farm payrolls increased by 150,000 in October vs. 180,000 estimate and US unemployment data ticked to a 2-year high of 3.9%.
- The US Dollar starts the week lower against major peers, continuing last week’s decline, driven by the crash in US Yields and Federal Reserve repricing after the release of US jobs data. Bloomberg Spot Index is lower 0.2%, after falling 0.8% on Friday.
- On the data front, it will be a quiet week, with only the Senior Loan Officer Opinion Survey (Mon.) and Trade Balance (Tue.) due.
- In the euro-area, we will be looking out for Germany’s industrial production (Tue.), where we expected it to remain weak for September and the main driver for the drop in 3Q23 GDP. Eurogroup is schedule to meet in Brussels (Wed.), with discussions around fiscal policy and inflation on the agenda.
- EUR/USD is steady this morning, trading in the 1.0725-1.0745 range, after advancing last week. EUR/GBP is little changed on the day, trading at 0.8670,
- UK Takeaway from last week: The MPC chose to hold their benchmark interest rate at 5.25%, in line with consensus. Although BOE Governor Andrew Bailey left the door open for further interest rates hikes if needed, the upcoming sharp drop in inflation later this month and an economy that is preparing for a recession, should remove any “ideas” of further tightening.
- Key data this week: 3Q23 GDP (Fri.), where the UK economy likely has contracted due to tighter credit conditions, and it should mark the start of the recession.
- Cable is trading just under 1.24, after jumping on Friday following US Jobs data.
