Week ahead: Inflation dominates, while OPEC bring potential energy volatility

Wednesday

RBNZ interest rate decision

The New Zealand central bank comes into focus on Wednesday with markets looking for the committee to leave the OCR unchanged at 5.5%. Given the 99% chance of a rate hold currently priced according to Refinitiv, much of the focus is likely to be on the outlook for interest rates and inflation. By and large we are expecting to see rates peak out at this level with the focus turning towards the timing of an initial rate cut next year. Look out for any indication over expected inflation rates as a guide over when the bank will be comfortable easing monetary policy. Inflation remains a key issue for the RBNZ, with the third quarter figure of 1.8% ringing alarm bells for many. However, the third quarter does typically represent the outlier, with the past three-years seeing a spike in Q3 CPI. Will the RBNZ overlook this recent figure to chart a pathway towards 2024 rate cuts?

Australian monthly CPI

The latest inflation data out of Australia brings potential AUD volatility, with markets looking for any signs that the RBA may need to tighten further. With the September figure standing at 5.6%, any notable decline in this figure could ease expectations for a rate hike. Refinitiv points towards a current 59% expectation of another hike by March. This could reduce significantly if inflation heads sharply lower, bringing the potential for the recent AUD strength to unwind.

US GDP (second estimate)

Markets will be watching for any particular movement in the third quarter growth figure, following on from the 4.9% signalled back in late-October. A number of companies have signalled weaker consumer demand in recent months, highlighting the potential for the late Q3 data to come in weaker than that highlighted in the first estimate. As such, there could be some movement in this revised figure that may shift sentiment around US growth.

Thursday

China PMI surveys

The November manufacturing and services PMI surveys bring a fresh insight into economic growth in the worlds second largest economy. Market estimates point towards a potential improvement across both figures, with particular attention likely to be paid to the manufacturing sector given the potential for a move back above the 50 threshold (currently 49.5). A strong rebound for these Chinese PMI surveys could help lift associated instruments such as AUD and NZD.

Eurozone inflation

The November inflation report for the eurozone brings a focus on whether recent deflationary trend will continue apace. Markets currently pricing in a 52% chance that the ECB will enact their first rate cut by April 2024, a decline in CPI would further enhance hopes of a dovish stance from Lagarde & co. Unfortunately that seems unlikely, with base effects meaning that the headline CPI rate looks likely to stabilise or rise over the coming months. Should that occur, we could see the euro rise, as expectations of that April cut start to unwind.

US Core PCE price index

The Fed’s favoured inflation gauge brings potential volatility for markets, with continued downside likely to be greeted with risk-on optimism. The belated nature of this reading means that we are only just seeing the October figure, coming off the back of the September reading of 3.7%.

OPEC meeting

OPEC opted to move their key meeting from Sunday to Thursday, with members working to find a compromise on output levels for African producers next year. Recent weakness in crude has been associated with internal disagreement over production restrictions, with traders keeping a close eye out for any signs that the strength of the OPEC resolve is weakening. In all likeliness we will see Saudi push for a strong united front on a desire to prop-up prices by limiting output. On that front, markets will be watching to see if Saudi announce an extension of their 1-million barrels per day output cut beyond the current December expiry.

Salesforce Q3 earnings

Tech giant Salesforce have found themselves under pressure to shift away from their expansionary M&A-led growth strategy into one which prioritises profits. Marc Benioff has talked a good talk on the matter, but whether it translated into an improved earnings outlook remains to be seen. Artificial intelligence remains a key growth area for the firm, with their Einstein project providing a focus for those hoping to see new revenue streams.

Friday

Canadian jobs report

The new month kicks off with the Canadian jobs report, as we await another week for their US counterparts to release their data. Markets expect to see wage growth remain at 5%, highlighting strong underlying inflation pressures. Meanwhile, keep an eye out for the unemployment rate as markets forecast another tick higher on a figure that has already pushed from 5% to 5.7% in six-months alone. We will also track the employment change figure, although there are concerns that recent positive readings have been borne out of higher part-time employment as people struggle to cope with inflation pressures.