After the deluge of central bank policy decisions in the past couple of weeks, markets may be allowed to take a bit of a breather this week. However, US inflation data (both PPI and CPI) will move markets, along with the prelim Michigan Sentiment. Away from the States, Chinese inflation will drive sentiment, whilst GBP traders will be looking towards key growth data on Thursday. 

Watch for: 

  • North America – US PPI and CPI, along with Michigan Sentiment
  • Europe & Asia – German ZEW, Chinese CPI inflation and UK growth in focus 
  • LatAm – Inflation for Chile, Mexico and Brazil; Bank of Mexico rates decision

North American data: 

  • US PPI (Tuesday 9th November, 1330GMT) is expected to increase by +0.5% MoM
  • US CPI (Wednesday 10th November, 1330GMT) core inflation is expected to increase by +0.3% MoM
  • Veterans Day US public holiday (Thursday 11th November) 
  • Prelim Michigan Sentiment (Friday 12th November, 1500GMT) 
  • US JOLTS jobs openings (Friday 12th November, 1500GMT) 

Rising inflation is still very much at the forefront of the concerns for the Federal Reserve. The Fed is sticking to the “transitory” mantra but showed signs of blinking in the Fed meeting last week. Will we get more signs of more “elevated” (in the words of the Fed) inflation? Core and headline PPI is expected to increase by +0.5% on the month which would increase the year on year core PPI to above 7%. The producer's prices tend to feed through into consumer price rises. The US core CPI on Wednesday is forecast to increase by +0.3% on the month which would pull the year on year inflation towards +4.3% again. 

US core PPI & CPI inflation

After a quiet day for markets on Thursday (due to the Veterans Day public holiday), Friday’s prelim reading of Michigan Sentiment will create some interest at the end of the week. It is interesting to see the Michigan Sentiment and Consumer Confidence data diverged slightly in Q2 but came back together in Q3 (calling the Q3 deterioration in growth). An improvement in Q4 is likely as the delta variant plays less of an impact. This should help support USD. 

Market Reaction: 

  • USD to strengthen any increase to PPI and CPI.
  • USD will also move on the Michigan Sentiment, paying close attention to the 5 to 10 year inflation expectations data too.

Europe & Asia: 

  • German ZEW Economic Sentiment (Tuesday 9th November, 1000GMT) is expected to fall to 19.0 in November (from 22.3 in October)
  • China CPI (Wednesday 10th November, 0130GMT) October inflation is expected to increase to +1.4% (from +0.7% in September) 
  • Australia Unemployment (Thursday 11th November, 0030GMT) is expected to increase marginally to 4.7% (from 4.6%) due to an increase in the participation rate.
  • UK GDP Q3 prelim (Thursday 11th November, 0700GMT) is expected to be +6.8% after a final 5.5% in Q2.
  • UK Industrial Production (Thursday 11th November, 0700GMT) 
  • Eurozone Industrial Production (Friday 12th November, 1000GMT) 

German industrial data (both production and surveys) has been deteriorating for several months now and the German ZEW Economic Sentiment reflects this. The survey is expected to show a further decline in November, driven also by a deterioration in current conditions.

German ZEW Economic Sentiment

Unlike most of the other major economies, Chinese inflation has been falling for the past few months. However, consensus forecasts suggest that it is about to pick up in October to +1.4% (from +0.7% in September). A higher CPI suggests increased economic activity, but if this also comes with a much higher PPI then the impact of this could become negative.

Major Economy Core Inflation

There is a swathe of UK economic data on Thursday. The prelim Q3 UK GDP is undoubtedly the main focus for GBP traders. Growth is expected to have remained strong in Q3 with another +6.8% QoQ, which comes after the final upward revision to 5.5% in Q2 is a decent return.

Market Reaction: 

  • EUR under selling pressure if German ZEW misses estimates
  • Broad risk appetite to be driven by Chinese inflation. 
  • GBP volatile around UK GDP surprises.

Latin America: 

  • Chile inflation (Monday 8th November, 1330GMT) 
  • Mexico inflation (Tuesday 9th November, 1100GMT) is expected to increase marginally to 6.13% in October (from 6.10% in September)
  • Brazil inflation (Wednesday 10th November, 1300GMT) is expected to see a month on month increase of +1.25% in October (+1.16% in September)
  • Bank of Mexico interest rates (Thursday 11th November, 1900GMT) 

LatAm central banks have been hiking rates to battle against the impact of rising inflation. This week we get a good gauge of whether the tighter policy in Chile, Mexico and Brazil is doing anything to moderate pricing pressures. 

Despite a -0.2% GDP decline in Q3, the Bank of Mexico has focused on fighting inflation, which at 6.1% is double the 3% target. Three successive +0.25% rate hikes have taken the interest rate to 4.25%. With inflation expected to continue to increase, further rate hikes are likely in the months ahead, perhaps with another +0.25% this week. 

Market Reaction

  • Volatility on CLP, MXN and BRL, with any signs of falling inflation being positive
  • Focus also on MXN with the interest rate decision on Friday.