The broad dollar rally continued last week. NOK, JPY, and CAD outperformed while GBP, AUD, and NZD underperformed. We believe global PMIs for November this week will continue to show that economic and policy divergences remain in favor of the dollar. Those divergences will likely be magnified by the incoming Trump administration.

AMERICAS

Chair Powell’s comments last week have set the tone for Fed commentary this week. To be clear, he reiterated that “The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” He added that “I think in this situation, what it calls for is us to be careful, move carefully, and as we sort of reach the range or get near the plausible range of neutral levels, it may be the case that we slow the pace of what we’re doing just to increase the chances that we get this right.”

The market has responded. Odds of a December cut have fallen below 60% in the Fed Funds futures market and are 40% in the OIS market. We will have one more each of the jobs, CPI, PPI, and retail sales reports to digest ahead of the December 17-18 meeting. Looking ahead, the swaps market is pricing in a terminal rate slightly north of 3.75%, which is about a full percentage point above the Fed’s expected long-term rate of 2.875% in the September Dot Plots. Fed officials are likely to follow Powell’s lead this week. Goolsbee speaks Monday. Schmid speaks Tuesday. Cook and Bowman speak Wednesday. Hammack (twice), Goolsbee, and Barr speak Thursday. Bowman speaks Friday.

Growth remains solid in Q4. The Atlanta Fed GDPNow model's estimate for Q4 GDP stands at 2.5% SAAR and will be updated Tuesday after the data. Elsewhere, the New York Fed’s Nowcast model is tracking Q4 growth at 2.1% SAAR and will be updated Friday, while its initial forecast for Q1 2025 will come at the end of November. Bottom line: the US economy continues to grow at or above trend as we move into 2025.

Preliminary November S&P Global PMIs Friday will be the data highlight. Manufacturing is expected at 48.8 vs. 48.5 in October, services is expected at 55.3 vs. 55.0 in September, and the composite is expected at 54.2 vs. 54.1 in September. ISM PMIs won’t be reported until the week after next.

Weekly jobless claims will be closely watched. That’s because the initial claims reading will be for the BLS survey week containing the 12th of the month and are expected at 220k vs. 217k previously. That reading was the lowest since mid-May and dragged the 4-week moving average down to 221k, also the lowest since mid-May. There is no Bloomberg consensus yet for NFP but its whisper number stands at 150k. Continuing claims are reported with a 1-week lag and are expected at 1.885 mln vs. 1.873 mln previously.

Regional Fed surveys for November will continue rolling out. Last week, the Empire manufacturing survey came in at 31.2 vs. 0.0 expected and -11.9 in October. New York Fed services survey will be reported Monday. Philly (7.0 expected) and Kansas City Feds manufacturing surveys will be reported Thursday. Kansas City Fed services survey will be reported Friday.

Housing data will remain in focus. November NAHB housing market index will be reported Monday and is expected to fall a point to 42. October building permits and housing starts will be reported Tuesday. October existing home sales will be reported Thursday. As background, residential investment subtracted -0.2 ppt and -0.1 ppt from Q3 and Q2 GDP growth, respectively, and is expected to remain a drag to growth in Q4. This could lead the construction sector to accelerate job cuts and worsen the slowdown in the U.S. labor market. However, it’s worth noting that total construction jobs account for 5.2% of total non-farm employment while residential construction jobs make up only 1.2%.

Canada highlight will be October CPI data Tuesday. Headline is expected to pick up three ticks to 1.9% y/y, while core trim is expected to remain steady at 2.4% y/y and core median is expected to pick up a tick to 2.4% y/y. We believe the Bank of Canada has room to dial up its easing as inflation remains close to the 2% target and inflationary pressures are no longer broad-based. Moreover, monetary policy remains too tight, heightening the downside risk to the economy. At 3.75%, the policy rate remains above the bank’s nominal neutral interest rate estimate of 2.25-3.25%. The market is pricing in nearly 50% odds of a jumbo 50 bp cut at the December 11 meeting.

September retail sales data Friday will also be important. Headline is expected to remain steady at 0.4% m/m. Going forward, businesses think sales growth will strengthen over the coming year but remain soft.

EUROPE/MIDDLE EAST/AFRICA

Eurozone highlight will be Q3 negotiated wage data Wednesday. Negotiated wage growth slowed to 3.55% in Q2 from 4.74% in Q1. The ECB’s forward-looking wage tracker points to further easing in wage pressures, leaving plenty of room for the ECB to keep easing. Markets are pricing in 150 bp of additional ECB rate cuts over the next twelve months that would see the policy rate bottom near 1.75%. The ECB’s Financial Stability Review will also be published Wednesday.

ECB doves control the narrative. Nagel, Guindos, Makhlouf, Lane, Stournaras, Vujcic, and Lagarde speak Monday. Elderson and Muller speak Tuesday. Guindos, Stournaras, and Makhlouf speak Wednesday. Villeroy, Knot, Holzmann (twice), Cipollone, Escriva, Lane, Elderson, Kazimir, and Vujcic speak Thursday. Lagarde, Guindos, Nagel, Villeroy, and Schnabel speak Friday.

Preliminary November PMIs Friday will also be important. Headline manufacturing is expected to remain steady at 46.0, services is expected to remain steady at 51.6, and the composite is expected to remain steady at 50.0. Looking at the country breakdown, the German composite is expected at 48.7 vs. 48.6 in October while the French composite is expected at 48.5 vs. 48.1 in October. Italy and Spain will be reported with the final PMI readings in early December.

U.K highlight will be October CPI data Wednesday. Headline is expected at 2.2% y/y vs. 1.7% in September, core is expected at 3.1% y/y vs. 3.2% in September, and CPIH is expected at 3.1% y/y vs. 2.6% in September. Of note, CPI services is expected at 4.8% y/y vs. 4.9% in September. For reference, the BOE projects headline CPI at 2.2% y/y and services CPI at 5.0% y/y in October. Stubbornly high services price inflation is a key factor behind the BOE’s cautious easing guidance.

BOE MPC member Catherine Mann speaks in a fireside chat with Brown Brothers Harriman Thursday. Mann is a staunch hawk on the MPC. At the November 7 meeting, the MPC voted by a majority of 8–1 to cut rates 25 bp to 4.75%. Mann was the lone dissent in favor of keeping rates steady at 5.0%. Greene speaks Monday. Bailey, Lombardelli, Mann, and Taylor speak Tuesday. Ramsden speaks Wednesday.

Preliminary November PMIs Friday will also be important. Manufacturing is expected at 50.0 vs. 49.9 in October, services is expected to remain steady at 52.0, and the composite is expected to remain steady at 51.8.

October retail sales data will also be reported Friday. Headline is expected at -0.3% m/m vs. 0.3% in September, while sales ex-auto fuel is expected at -0.4% m/m vs. 0.3% in September. Both measures are expected to slow in y/y terms. Nevertheless, positive real income growth supports a continued recovery in consumption spending activity.

Norway reports Q3 GDP data Thursday. Mainland real GDP is expected at 0.3% q/q vs. 0.1% in Q2. The Norges bank is more optimistic, penciling in an increase of 0.7% q/q in Q3. The bank has made it clear that the policy rate will remain at 4.50% through the end of 2024 before being gradually reduced from 2025 Q1. The first full 25 bp rate cut is priced in for March.

ASIA

Bank of Japan Governor Ueda speaks Monday. In October, Ueda acknowledged that markets have slowly regained stability and risks related to the U.S. economy were lower than before. Ueda’s updated view on financial market stability will be scrutinized for policy guidance ahead of the December 18-19 BOJ meeting. Markets are pricing in about 55% probability of a rate hike then.

Japan highlight will be October CPI data Friday. Headline is expected to fall two ticks to 2.3%, core (ex-fresh food) is expected to fall two ticks to 2.2% y/y, and core ex-energy is expected to pick up a tick to 2.2% y/y. If so, core would be the lowest since April and nearing the 2% target. Overall, underlying inflation in Japan remains in a firm downtrend and argues for a cautious tightening cycle. The swaps market is pricing in 45 bp of tightening over the next 12 months.

Preliminary November PMIs Friday will also be important. Let’s see if the composite PMI is able to bounce back after falling sharply to 49.6 in September.

October trade data will be reported Wednesday. Exports are expected at 0.9% y/y vs. -1.7% in September, while imports are expected at -1.9% y/y vs. 1.8% in September. Weakness in the trade data is particularly disappointing given low base effects from last year and suggest weakness in both external and domestic demand.

RBA minutes will be released Tuesday. At that meeting, the RBA kept rates unchanged at 4.35% and stuck to its neutral policy guidance. The RBA reiterated “the Board is not ruling anything in or out” and “the need to remain vigilant to upside risks to inflation.” The RBA cautioned again that underlying inflation remains too high and “that it will be some time yet before inflation is sustainably in the target range” but added “and approaching the midpoint.” Indeed, the RBA still projects trimmed-mean inflation to reach the midpoint of the 2-3% band in December 2026 despite lowering its GDP growth outlook across the projection horizon. Meanwhile, Governor Bullock pointed out that the Board “didn’t explicitly discuss rate hike or cut scenarios” and emphasized “I think we have the right settings at the moment.” Markets are pricing in the first 25 bp cut for May 2025. Bullock speaks Thursday.

Preliminary November PMIs Friday will be the data highlight. Let’s see if the composite PMI can maintain its toehold above 50. We believe it will be difficult to stay above 50 given our view that stimulus is unlikely to have much lasting impact on the mainland China economy.