In this episode:
- Europe: Focus Returns to Structural and Fiscal Themes
- Global: A Packed Week for Central Banks and Data
- United States: CPI, the Fed, and Earnings Dominate
Europe: Focus Returns to Structural and Fiscal Themes
- The ECB is comfortable with current policy settings, with limited expectation for further rate cuts in the near term.
- Next week’s meeting brings no new projections; focus will turn to fiscal trajectories and centralisation.
- German IFO, Q3 GDP, and CPI data will help gauge the impact of fiscal expansion and shape expectations for 2025 policy distribution.
Global: A Packed Week for Central Banks and Data
- The Bank of Canada may cut rates by 25bps, while the BoJ and Chile are expected to hold steady.
- Japan’s new Prime Minister could mark a policy shift with implications for rates, FX, and equities.
- Key data includes Australia’s CPI, multiple EM GDP releases, and inflation updates from Brazil and Poland — all feeding into the global policy narrative.
United States: CPI, the Fed, and Earnings Dominate
- The delayed US CPI release will be critical for shaping expectations ahead of the FOMC’s widely anticipated 25bps rate cut.
- Powell’s recent comments suggest balance sheet runoff may slow, but the key message will remain centred on rates.
- Five of the ‘Magnificent Seven’ report next week, adding earnings and market sentiment to an already pivotal US calendar.
Transcript (AI Generated)
Matt Jones
Welcome to "The Long & Short of the Week Ahead", a production of Eurizon SLJ Capital that takes a look at the macro-economic themes of the week ahead and has been recorded for professional investors.
My name is Matt, Head of Distribution for Eurizon SLJ Capital, and I'm joined by Neil Staines, Senior Portfolio Manager.
Welcome back, Neil. It's great to have you here with us again.
Neil Staines
Thank you very much Matt. It's great to be here.
Matt Jones
So, starting this week with Europe, we get some interesting data and the ECB meeting next week. How are we thinking about Europe at the moment?
Neil Staines
Yeah, absolutely. Thanks, Matt. With the ECB having reached their expectation, or their estimate, of what constitutes the equilibrium level of rates in Europe back in June, the European data has lost some of its near-term inference, at least as far as its impact on monetary policy is concerned.
The messaging from the ECB into the blackout has been one of comfort with the current policy rate. While there are still visibly divergent risk biases — the southern states being more dovish, and the northern states generally more hawkish — the one-year forward market pricing has only modest dovish risk premia and no real further rate cut expectations.
Next week’s meeting brings no new projections, so we would expect the press conference questions to focus on structural issues and idiosyncratic factors, such as fiscal trajectories and centralization.
On the data front, we get German IFO for October on Monday, and that’s the first chance to gauge the fiscal expansion impact on business optimism. We get a first look at Q3 GDP on Wednesday, and it’s going to be very interesting — particularly in terms of framing the ECB decision and the distribution around the expectations within the ECB.
Then we get the October CPI print on Friday, after the ECB. We also get some Q3 earnings throughout the week from Europe, but not likely enough to move the needle on rate expectations next week.
Europe is much more of a focus than it has been recently, nonetheless.
Matt Jones
And how about more globally? What are we looking for in the global economy next week?
Neil Staines
Yeah, absolutely. It’s certainly a busy week for the global economy next week. Sticking with the central bank theme, we hear from Canada, where we’re expected to cut rates 25 basis points to 2.25%, although that is marginally less clear after the recent CPI print, and the Bank of Japan, who are expected to remain unchanged at 0.5%, as well as Chile, also expected unchanged at 4.75%.
On the Bank of Japan and Japan especially, the political implications in particular — we discussed further in this week’s blog — but the new Prime Minister, a self-titled Japanese Margaret Thatcher, will likely have material consequences for rates, FX, and equities in Japan going forward.
On the data front, we get the jobless rate and retail sales in Japan, both expected on the strong side, and the recent announcement by Rengo’s head that wage demands will total 5% in the next year will certainly help sentiment in this regard.
In Australia, we get the CPI for September, and this will certainly be closely watched as the delicate growth and inflation trade-off in Australia remains key for the RBA and the path of the cash rate.
Further afield, we get the flash Q3 GDP data from South Korea, Hungary, the Czech Republic, and Mexico; unemployment updates from Mexico and Brazil; and inflation updates from Brazil and Poland. So, plenty to watch for next week on the global data front.
Matt Jones
And finally, as usual, what about the US? With the shutdown still leaving question marks over data releases, what are we looking out for next week?
Neil Staines
Absolutely. It’s a huge week for the US. Into the close this week, we get the delayed release of the US CPI print, and there’ll be a huge focus.
The significance of the US inflation trajectory at the current juncture cannot be understated, especially in relation to the monetary reaction function relative to current market pricing. Again, we discuss this further in this week’s blog.
Into next week, the connotation of the CPI and the impact on market rate expectations will dominate, but we also have plenty to focus on from a data front. On Wednesday, we get the FOMC, where the market is essentially fully priced for a 25-basis-point cut. With no press conference, the focus will be on the narrative around the path of growth, inflation, and in particular how that labour market interacts between demand and inflation — and the inference about the likelihood of a further 25-basis-point cut in December, which is also essentially fully priced.
At a recent event, Powell noted that the Fed may stop balance sheet runoff over coming months. However, we expect this to be repeated, but the singular emphasis of the meeting to be on that 25-basis-point rate cut.
In addition to the Fed, we get plenty of earnings reports next week — we get five of the Magnificent Seven. So, with the Fed, inflation, and earnings next week, there’s plenty to attract us to the US, despite the lack of ongoing data.
Shutdown progress, geopolitical developments, and trade — especially in relation to China, with the APEC Summit meeting of Trump and Xi now officially on — will all be a big focus for markets next week. It is a huge week for the US.
Matt Jones
Fantastic. Thank you for joining us once again and outlining your thoughts on the week ahead. I look forward to catching up with you again next time.
Disclosure
This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.
ESLJ-241025-P2
Subscribe to our insights
If you are interested in our content, please sign up below and we will deliver Eurizon SLJ insights right to your inbox.
I consent to my data being collected and stored for the purposes of providing me information regarding my enquiry and related services. If you have any questions about your data please contact us at research@eurizonslj.com
Our Research
Our written research products aim to provide unique and orthogonal insights on key global economic and policy issues in a timely fashion.
