- MON: German Ifo (Dec), New Zealand Trade Balance (Nov).
- TUE: BoJ & NBH Policy Announcements, RBA Minutes (Dec); EZ HICP Final
(Nov), Canadian CPI (Nov), Japanese Trade Balance (Nov). - WED: PBoC LPR, BoC Minutes (Dec); UK CPI (Nov), EZ Current Account
(Oct), EZ Consumer Confidence Flash (Dec), US Existing Home Sales (Nov). - THU: CBRT & CNB Policy Announcements; UK PSNB (Nov), US Final GDP
(Q3), IJC (w/e 15th), Philadelphia Fed (Dec), Canadian Retail Sales (Oct),
Japanese CPI (Nov). - FRI: BoJ Minutes (Oct), UK GDP (Q3), UK Retail Sales (Nov), Swedish PPI
(Nov), US PCE Price Index (Nov), Durable Goods (Nov), Uni. of Michigan Final
(Dec), New Home Sales (Nov).
NOTE: Previews are listed in day order
BoJ Announcement (Tue):
The BoJ is expected to maintain its policy settings at the December
meeting, according to all respondents polled by Reuters between December 8th to
14th. BoJ expectations have been choppy over the past couple of weeks following
commentary from Governor Ueda who, among other points, said “handling of
monetary policy would get tougher from the end of the year”. These comments
fuelled speculation of a potential December move by the BoJ, with the Yen
rallying on the expectations. Thereafter, a Reuters source piece said there was
no intention by Governor Ueda to signal “anything about the timing of a policy
change”. More recent sources clarified that the BoJ is said to see little need
to end negative rates in December and intends to come to a decision based on data
up to the last minute, and officials view the potential cost of waiting for
more data as not very high. Sources added that the BoJ lacks proof of
sustainable inflation and has not yet seen sufficient evidence of wage growth
which would support sustainable inflation. The latest Tokyo CPI, which is seen
as a precursor to the nationwide metric released on Thursday (after the BoJ
meeting), saw the Core Y/Y miss expectations (2.3% vs exp. 2.4%, prev. 2.7%).
Furthermore, following the December FOMC decision (which saw a dovish pivot), a
Nikkei article citing a BoJ insider suggested Japan’s negative rate exit
scenario has been muddled by the Fed’s outlook -”if possible, I’d look forward
to wage increases that surpass this year’s”. The article added that from the
standpoint of consistency, the BoJ would hold off until confirming the results
of the spring labour talks, including those at small businesses, and that
perspective makes an exit in the latter half of 2024 a convincing scenario as
well. “The end of the negative interest rate policy would be the beginning of a
tightening cycle,” the BoJ insider said. The latest Reuters poll shows that 21%
of economists think the BoJ will begin to unwind ultra-loose policy in January
2024, while 84% expect the BoJ will end NIRP in 2024 vs 71% in the November
poll and 54% in the October poll. 88% of economists expect the BoJ to end YCC
policy and 12% think the BoJ will tweak again. 28 out of 42 economists expect
the BoJ to raise the deposit rate to 0% or 0.10% by end-Q2 2024, while two
expect rates at 0.25%.
Japan Trade Balance (Tue):
The November trade deficit is expected to widen to JPY 962.4bln from the
prior deficit of JPY 662.5bln, whilst exports are seen cooling to 1.5% (prev.
1.6%) but the contraction in imports seen improving to -8.6% (prev. -12.5%).
Auto-related exports are anticipated to remain strong due to easing supply
constraints. However, machinery-related shipments are likely to see a
contraction, mainly due to the downturn in the Chinese economy, according to
desks.
RBA Minutes (Tue):
The RBA will release the minutes from the December 5th meeting next week
where the central bank kept the Cash Rate Target unchanged at 4.35%, as
expected, and reiterated its forward guidance on whether further tightening is
required to ensure inflation returns to the target in a reasonable timeframe
will depend upon data and evolving assessment of risks. RBA also repeated that
the Board remains resolute in its determination to return inflation to target
and will do what is necessary to achieve that outcome, as well as noted there
are still significant uncertainties around the outlook and that the limited
information received on the domestic economy since the November meeting has
been broadly in line with expectations. The language from the central bank was
largely reiterations of the commentary from the prior meeting and therefore
less hawkish than many were anticipating considering the rhetoric from RBA
Governor Bullock in the weeks leading up to the meeting who was more forceful
in her warnings that inflation remained a crucial challenge and had stated that
more substantial monetary policy tightening is the right response. Nonetheless,
participants will be eyeing the minutes on the off chance that there are more
meaningful clues on monetary policy.
Canada CPI (Tue):
The BoC’s recent policy statement said that central bank officials were
still concerned about the risks to inflation, although the updated statement
dropped a reference to inflationary risks increasing. The BoC wants to see
further and sustained easing of core inflation, and is continuing to monitor
inflation expectations too. It noted that its own preferred gauges of core
inflation have been ranging 3.5-4% recently, with the October metrics towards
the bottom of that range. BoC Deputy Governor Gravelle said the bank was
encouraged by the progress made in October, but wants to see the improvement
progress further, and the BoC was not there yet on its price goal, adding that
it was pretty clear that Canada was still not on the path to sustainable 2%
inflation.
PBoC LPR (Wed):
The PBoC is expected to maintain the Loan Prime Rates next week with the
1-Year LPR currently at 3.45% and 5-Year LPR at 4.20%. As a reminder,
rate-setters have refrained from making any adjustments to the benchmark
lending rates since the last cut to the 1-Year LPR in August which most new
loans are based on, while the 5-Year LPR which serves as a reference rate for
mortgages was last reduced in June. The expectations for the PBoC to maintain
the Loan Prime Rates follow the recent decision to keep the 1-Year MLF rate
unchanged at 2.50% as this provides a fairly reliable indicator for the central
bank’s intentions for the benchmark LPRs and although there has been
speculation in Chinese press regarding scope for a RRR cut to meet liquidity
needs at year-end, this has so far failed to materialise. Furthermore, recent
comments from PBoC Governor Pan haven’t suggested any urgency for a near-term
adjustment in which he noted that China’s economy continued to gain momentum in
recovery with the economy expected to achieve the GDP growth target for 2023
and they will continue to keep monetary policy accommodative, while the PBoC’s
Q3 Monetary Policy Report stated that they will further promote financial
institutions to lower the effective lending rate and that prudent monetary
policy will be forceful and precise.
BoC Minutes (Wed):
At its policy meeting, the BoC left rates unchanged at 5.00%, as
expected, but tweaked its statement with both hawkish and dovish tones. On the
dovish side, it noted signs that rate hikes were having an impact, stating that
“higher interest rates are clearly restraining spending: consumption growth in
the last two quarters was close to zero, and business investment has been
volatile but essentially flat over the past year.” It also referenced the Q3
GDP contraction, easing labour market, and that the economy was no longer in
excess demand. The statement dropped a line that said progress toward price
stability was slow, and inflationary risks have increased. On the hawkish side,
however, it reiterated concerns about the risks to the outlook for inflation, and
maintained guidance that it is prepared to raise the policy rate further if
needed. Still, with price pressures abating and economic growth slowing,
markets remain of the view that the central bank is done with rate hikes,
particularly since BoC Governor Macklem’s recent remarks that policy may now be
restrictive enough. Attention now is turning towards the start of its easing
cycle. Money markets are pricing a little over 100bps of easing in 2024, with
the first cut fully priced by April. Macklem has said that it was not the time
to be talking about rate cuts, and the BoC would likely be cautious over any
rising inflation expectations if the consumer starts to expect rate cuts.
UK CPI (Wed):
Expectations are for headline CPI in November to cool to 4.4% Y/Y from
4.6%, with the core measure seen slipping to 5.5% Y/Y from 5.7%, The October
report saw the headline decline to 4.6% from 6.7%, while core inflation fell to
5.7% Y/Y from 6.1%, while the all services measure slipped to 6.6% Y/Y from
6.9% (vs. MPC forecast of 6.9%). Analysts noted that the decline in the
headline rate was not too surprising following last year’s 25% increase in
household energy bills, which fell out of the annual comparison. For the
upcoming release, analysts at Investec expect that food and energy price
inflation will likely contribute to declines once again with scope for goods
prices to keep easing. The desk cautions that declines will not be uniform as
“base effects in clothing and footwear prices, for instance, look unfavourable,
as there was already a large drop last year”. From a policy perspective, given
that the MPC opted to hold rates at its December meeting and maintained
guidance that policy will need to be restrictive for an “extended” period of
time, the upcoming release will likely have little sway on the immediate rate
path. That said, there may be some modest fluctuations around current pricing
which sees an 88% chance of a May cut with 112bps of policy loosening priced by
year-end.
CBRT Announcement (Thu):
The CBRT is expected to raise its One-Week Repo Rate by 250bps according
to all 12 economists polled by Reuters. CPI data for November printed sub
forecasts but CPI Y/Y and PPI Y/Y both reaccelerated a touch, with the CPI Y/Y
at 61.98% (exp. 63.00%, prev. 61.36%), M/M at 3.28% (exp. 3.90%, prev. 3.43%),
and PPI Y/Y at 42.25% (prev. 39.39%). To recap the prior meeting, the CBRT
hiked its Weekly Repo Rate by 500bps (vs median exp. 250bps hike) to 40% (prev.
35%, exp. 37.5%); expectations ranged from 250-500bps. The central bank stated
that the pace of monetary tightening will slow down and the tightening cycle
will be completed in a short period of time. The statement clarified that
monetary tightness will be maintained as long as needed to ensure sustained price
stability. The latest CBRT survey meanwhile suggested the Repo Rate is seen at
36.65% (prev. survey 37.01%), USD/TRY seen at 29.6229 (prev. 29.9961), and
12-month CPI seen at 41.23% (prev. 43.94%).
Japan CPI (Thu):
The National Core Y/Y is expected to cool to 2.5% in November (vs 2.9%
in October). These expectations come as the November Core Tokyo CPI (seen as a
preview of the nationwide release) saw a cooling of a similar magnitude from
October (2.3% vs exp. 2.4%, prev. 2.7%). According to a Reuters poll of 17
economists, the expected fall in the core metric is partly due to energy.
“Consumer inflation will drop substantially thanks to the government’s energy
subsidy programs, and inflation is likely to decelerate to 2.7% YoY in November
from 3.3% in October”, say the analysts at ING. Looking at the corporate price
expectations survey within the latest BoJ Tankan release, Japanese firms expect
consumer prices to rise 2.4% a year from now (vs +2.5% in the previous survey,
2.2% 3 years from now (vs prev. +2.2%), and 2.1% 5 years from now (vs prev.
+2.1%). It’s also worth being aware that the release comes after the BoJ policy
announcement and as markets prepare to close out for Christmas.
UK Retail Sales (Fri):
The BRC gauge of retail sales rose 2.6% Y/Y in November, with the
accompanying release stating that “Black Friday began earlier this year as many
retailers tried to give sales a much-needed boost in November. While this had
the desired effect initially, the momentum failed to hold throughout the month,
as many households held back on Christmas spending”. Elsewhere, the Barclaycard
consumer spending report noted “overall Retail spending grew 2.5% in November
2023, an uplift compared to the year-on-year growth in October 2023 (of 1.2%),
as Clothing retailers and Department Stores received a boost due to Black
Friday sales starting earlier on in the month, combined with the late arrival
of seasonally cold weather”. Ahead of the upcoming release, Moody’s says that
“given losses to purchasing power and low sentiment we think households spent
less in the lead up to the holiday season. That said, Black Friday sales may
have been particularly attractive this year given households’ broad pessimism”.
US PCE (Fri):
Analysts expect to see PCE inflation cooling further in November after
similar outcomes seen within the CPI and PPI inflation reports. WSJ’s
Fedwatcher Nick Timiraos says core PCE inflation is projected to have been a
very mild 0.06% in Nov, and that could see the annual reading of core PCE fall
to 3.1% in November from 3.5% in October. And it would also imply that the
six-month annualised rate would have eased to 1.9%, below the Fed’s 2% price
goal.