Markets continue to ignore hawkish Fed

  • US FOMC Member Lockhart Speaks
  • UK MPC Member Weale Speaks
  • US FOMC Member Evans Speaks
  • CAD BOC Gov Poloz Speaks
  • AUD NAB Business Confidence: 5
  • CNY Trade Balance: 60.3B

Yesterday was light in terms of data with the US, Canada and Japan out of action due to Columbus Day. The only news worth noting yesterday came  from FOMC member Dennis Lockhart who spoke about the US economic outlook at the Association for University Business and Economic Research in Orlando. Lockhart continued his and the Fed’s hawkish tone, suggesting that little over 100k job gains a month is enough to lower unemployment and that data remains sound. Despite the Fed’s recent rhetoric which includes downplaying the weak September employment report, markets remain unconvinced of the likelihood of lift-off in December this year, with many institutions forecasting a rate hike as late as March next year.

On other news, Chinese trade figures which are set for release overnight are keeping traders on their toes. Chinese exports are expected to have dropped 6% in the year ending September, accelerating the erosion of shipments from the previous month. Imports are forecast to tumble further to 15.9%, extending the recent streak of negative readings. The world’s second largest economy has been the major source of worries in recent months. This week from China we have the release of CPI, PPI and the above mentioned trade balance where investors will continue to ponder the extent of China’s slowdown.

  • CHF PPI m/m
  • UK CPI y/y
  • UK BoE Credit Conditions Survey
  • UK PPI Input m/m
  • UK RPI y/y
  • German ZEW Economic Sentiment
  • CNY CPI y/y

Key inflation is set for release in the UK. The headline CPI annualised number is expected to remain anaemic, which will only delay the prospects of a rate hike. Meanwhile, the German ZEW economic sentiment is due to hit the wires.  The ZEW is a survey of about 275 German institutional investors and analysts which asks respondents to rate the relative six month economic outlook for Germany. The outlook is expected to deteriorate given the economic backdrop.