Turn to the Federal Reserve. Perhaps both this week’s ECB meeting and that of its US counterpart are the most predictable so far this year. However, there are always details that mark the interpretation that the market will give this coming Wednesday, where it will be necessary to take the pulse on whether the Fed begins to see the possibility of a recession closer, on the labor market (of which there will also be data this week ), on the dollar or even on the real estate market, whose prices have suffered the biggest month-on-month drop in history.
In any case, it is fully discounted by the market a further rise of 75 basis points that leaves the reference interest rate in the United States at 3.75%, the highest since December 2007. And what will have to be seen is if there are signs of a brake on this tapers or, on the contrary, the still high inflation is reason enough not to lift the foot off the accelerator. “We expect growth to continue to decline into the second quarter of next year due to the strength of the dollar, a cyclical change in inventories and the Fed’s monetary policy, and it is true that the problems in the supply chain are easing, which has been the main inflationary factor in recent months, so we believe that the Fed’s hike cycle is nearing its end,” they point out from Bank of America. “The slowdown in the real estate market is great proof that the process of raising rates is being transferred to economic activity and may be an important anticipation of a drop in consumption, which does not mean that at this next meeting we will see other increases in 75 basic points”, they argue in Julius Baer, who, on the other hand, recognize that “now the Fed could end the cycle of increases at 4.5%”. In this context, in the forecast that includes Bloombergthe peak is expected to arrive during the first quarter of next year at 4.75%.
Also in the United States, on Tuesday the PMI data Of October. In the manufacturing reading, the forecast is for it to fall to 50 points, the border between contraction and expansion. Also, on Friday it will be known the employment report of this month, in which a rise of one tenth in unemployment is expected, up to 3.6% and an increase in average hourly wages of 0.3%. “Investors expect job growth to slow to 200,000 in October; a better balance between labor supply and demand in the US would be welcomed by the Fed … and perhaps by investors,” they point out in Allianz GI.
Other events of interest
On this side of puddle we will also have important indicators. Especially we will know October inflation in the eurozone, which is expected to fall one tenth to 9.8%. Also on Monday will be published the economic growth for the third quarter. There are also PMIs on Wednesday and employment data on Thursday. “Preliminary figures may show that in the third quarter there has been no GDP growth after the second quarter’s expansion of 0.8% qoq in the second quarter of the year; as for inflation, it will probably take on unusual importance after in September the prices have skyrocketed at a record pace”, they explain in Allianz GI.
Finally, we must also be aware of the PMI data from China at a key moment for the Asian country in which it could enter a contraction, the first data from the mid-term elections in the US and, above all, the opec meeting and its allies, who will decide whether to continue cutting oil supply to keep prices at current levels, extend the cut or increase it.