Drivers for the Week of October 16, 2022

October 16, 2022
Here's a look at the main drivers in Developed Markets this week.

The broad-based dollar rally continued last week. GBP and NOK outperformed while AUD and JPY underperformed. With the lack of any new major fundamental drivers this week, the greenback may consolidate its recent gains and given the foreign currencies some breathing room. However, the dollar is likely to continue climbing as Fed tightening expectations remain heightened.


The Fed releases its Beige Book report Wednesday. The last report was based on survey responses on or before August 29. Since then, we have gotten two sets of job and inflation data that show that the labor market remains firm and price pressures are still rising and broadening. However, recent PMI readings suggest that the supply chains continue to heal. When all is said and done, we believe the report will support a 75 bp hike at the November 1-2 FOMC meeting. Of note, a 50 bp hike at the December 13-14 FOMC meeting is fully priced in, with over 65% odds of a larger 75 bp move then. The swaps market is still pricing in a peak Fed Funds rate near 5.0% but this could move even higher.

There will be many Fed speakers this week. Bostic and Kashkari speak Tuesday. Kashkari, Evans, and Bullard speak Wednesday. Harker, Jefferson, Cook, and Bowman speak Thursday. Williams speaks Friday. At midnight Friday, the media embargo goes into effect and there will be no Fed speakers until Chair Powell’s press conference November 2.

Regional Fed manufacturing surveys for October will start rolling out. Empire survey kicked things off today and came in at is expected at -9.1 vs. -4.3 expected and -1.5 in September. Philly Fed reports Thursday and is expected at -5.0 vs. -9.9 in September. In between, September IP will be reported Tuesday and is expected at 0.1% m/m vs. -0.2% in August. While there are pockets of weakness, the manufacturing sector remains in solid shape.

Housing data should show continued weakness. NAHB housing market index for October will be reported Tuesday and is expected at 43 vs. 46 in September. If so, this would be the lowest since May 2020. September building permits and housing starts will be reported Wednesday and are expected at -0.8% m/m and -6.5% m/m, respectively. Existing home sales will be reported Thursday and are expected at -2.1% m/m.

Other minor data will be reported. August TIC data will be reported Tuesday. Weekly jobless claims and September leading index (-0.3% m/m expected) will be reported Thursday. Initial claims will be for the BLS survey week containing the 12th of the month and are expected at 230k vs. 228k the previous week. Continuing claims are reported with a one-week lag and so next week’s reading will be for the BLS survey week. This week, they are expected at 1.38 mln vs. 1.368 mln the previous week. It’s early still but consensus for October NFP stands at 150k vs. 263k in September, while the unemployment rate is seen rising a tick to 3.6%.

Canada reports key data. September CPI will be reported Wednesday. Headline is seen falling two ticks to 6.8% y/y, while core common is seen falling one tick to 5.6% y/y. If so, it would be the third straight deceleration in headline from the 8.1% y/y peak in June to the lowest since April but still well above the 2% target. August retail sales will be reported Friday. Headline is expected at 0.1% m/m vs. -2.5% in July, while sales ex-autos are expected at 0.3% m/m vs. -3.1% in July. Bank of Canada releases its Q3 business outlook survey Monday. At the last policy meeting September 7, the BOC hiked rates 75 bp to 3.25% and warned that “Given the outlook for inflation, governing council still judges that the policy interest rate will need to rise further.” Since then, the bank has maintained a hawkish stance as the economic data have come in firm. WIRP suggests nearly 75% odds of a 75 bp hike at the next meeting October 26, while the swaps market is pricing in a peak policy rate between 4.25-4.5%.


Many believe Prime Minister Truss’ days are numbered. Truss and former Chancellor Kwasi Kwarteng are the obvious losers in this fiasco. The winners? New Chancellor Jeremy Hunt and Bank of England Governor Andrew Bailey. Indeed, the two are off to a good working relationship as Bailey said “There is a very clear and immediate meeting of the minds on the importance of sustainability.” This was a clear reference to the more antagonistic relationship that developed early between the Truss government and the Bank of England. Recall how Truss implicitly threatened the BOE with her call for a review of its mandate. We suspect those calls will no longer be heard under Hunt.

Chancellor Hunt announced a near total rollback of Kwarteng’s proposed fiscal plan. Reports suggest Hunt caught Truss and her team off guard, which supports the widely-held view that Hunt is now the effective head of the Tory government, not Truss. Hunt said “There will be more difficult decisions, I’m afraid, on both tax and spending as we deliver our commitment to get debt falling as a share of the economy over the medium term.” He will deliver his full fiscal plan October 31, as Kwarteng had been scheduled to do before he was sacked. While Hunt’s announcement has added to bullish sterling sentiment, we must stress that this just gets us back to where we were in mid-September. The U.K. is still headed for recession and so the negative fundamental backdrop remains in place. It’s just not as horrible as it was under Kwarteng.

The U.K. data dump continues. September CPI data will be reported Wednesday. Headline is expected to rise a tick to 10.0% y/y, core is expected to rise a tick to 6.4% y/y, and CPIH is expected to rise two ticks to 8.8%y/y. October GfK consumer confidence will be reported Thursday and is expected at -52 vs. -49 in September. September retail sales and public sector net borrowing data will be reported Friday. Headline sales are expected at -0.5% m/m vs. -1.6% in August, while sales ex-auto fuel are expected at -0.4% m/m vs. -1.6% in August. GDP unexpectedly fell m/m in August and is likely to do so again in September if retail sales weaken again.

Bank of England tightening expectations have eased as Hunt makes his mark. WIRP suggests a 100 bp hike November 3 is fully priced in, down from 150 bp at the peak of the recent crisis. The swaps market is pricing in a peak policy rate near 5.25%, down from 6.25% at the peak of the crisis. That said, the U.K. is still heading for recession even as the bank tightens.

Eurozone has a quiet week. Highlight is the October ZEW survey from Germany Tuesday. Expectations component is seen at -66.5 vs. -61.9 in September, the current situation is seen at -68.5 vs. -60.5 in September. Germany remains the weak link in the eurozone and is likely to drag the entire region along with it.

Yet ECB tightening expectations remain elevated. WIRP suggests a 75 p hike October 27 is fully priced in, along with more than 50% odds of a similar move December 15. The swaps market is pricing in a peak policy rate near 3.25%.


Japan highlight is September national CPI Friday. Headline is expected to fall a tick to 2.9% y/y, while core (ex-fresh food) is expected to pick up two ticks to 3.0% y/y. If so, core would be the highest since September 2014 and further above the 2% target. The Bank of Japan just delivered a dovish hold September 22 and is expected to maintain its ultra-dovish stance at the next meeting October 27-28. September trade data will be reported Thursday. Exports are expected at 26.6% y/y vs. 22.0% in August, while imports are expected at 44.9% y/y vs. 49.9% in August.

Australia highlight is September jobs data Thursday. Consensus sees 25.0k jobs added vs. 33.5k in August, while the unemployment rate is expected to remain steady at 3.5%. At the last meeting October 4, RBA hiked rates 25 bp to 2.60% vs. 50 bp expected. Governor Lowe stated that “The cash rate has been increased substantially in a short period of time. Reflecting this, the Board decided to increase the cash rate by 25 bp this month as it assesses the outlook for inflation and economic growth in Australia.” While the RBA said it expects to hike rates further, it’s clear that it is slowing the pace in order to see how past tightening effects the economy. WIRP suggests less than 80% odds of a 25 bp hike at the next meeting November 1, while the swaps market sees the policy rate peaking near 4.25%. We will get updated macro forecasts at the November 1 meeting.

New Zealand highlight is Q3 CPI Tuesday. Headline inflation is expected at 6.5% y/y vs. 7.3% in Q2. If so, it would be the first deceleration since Q3 2020 to the lowest since Q4 2021 but still well above the 1-3% target band. At the last meeting October 5, RBNZ hiked rates 50 bp to 3.5% and noted that “The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and contribute to maximum sustainable employment. Core consumer price inflation is too high and labor resources are scarce.” The bank also noted that “A lower New Zealand dollar, if sustained, poses further upside risk to inflation over the forecast horizon.” WIRP suggests another 50 bp hike to 4.0% November 23 is priced in, with nearly 40% odds of a larger 75 bp move. The swaps market is pricing in 175 bp of tightening over the next 12 months that would see the policy rate peak near 5.25%, which is well above the bank’s current expected rate path. We expect a hawkish shift in that rate path when updated macro forecasts are released at the November meeting, though a 5.25% peak seems a bit aggressive if Q3 inflation does ease. September trade data will be reported Friday.

More from Mind on the Markets

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2022 All rights reserved.

As of June 15, 2022 Internet Explorer 11 is not supported by

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see

captcha image

Type in the word seen on the picture

I am a current investor in another jurisdiction