We’ve recently seen falling inflation across the globe, which is a hugely welcome sign for policymakers. But labour markets still remain relatively tight, especially in this part of the economic cycle, sustaining historically high wage growth and services price inflation. Fed officials will probably continue with their slightly more hawkish rhetoric with victory against inflation not quite won, which goes against current interest rate expectations priced in by markets.

Fed funds futures see the FOMC as now finished hiking, with May the possible starting point for rate cuts and nearly 1% of easing priced in next year. Second tier data this week includes the weekly initial jobless claims, which recently showed a slowdown in the labour market. The FOMC minutes released on Wednesday may be slightly stale as slowing inflation and softening jobs figures have shifted investor focus to the timing of rate cuts. The dollar broke down again through its recent range last week after the cooler CPI data. The soft weekly close potentially points to more losses, with eyes on the 200-day simple moving average at 103.61 on the DXY index.

The latest round of business surveys will grab the attention in the eurozone and UK. These are released on Thursday, which is Thanksgiving in the US when most of its markets are closed, and traders Stateside take a long weekend break. Economic growth is stagnant in Europe and could turn down even further in the coming months as high interest rates start to bite. The upcoming PMIs for November are a leading indicator for the health of these economies and more depressed readings could dampen the recent rebound in the euro and the pound. That said, better-than-expected prints could see the single currency build on its breakout from the bull flag pattern seen last week.

Other markets to watch include oil, which has fallen sharply recently to four-month lows and is providing additional help with easing inflation pressure. The commodity is on a four-week losing run with a weaker dollar, Middle East geopolitical risk and low OPEC+ production failing to offer support. The yearly lows around $72 could come into view if we don’t get official confirmation soon about Friday’s comments from Saudi Arabia about a potential further extension of their voluntary production cut. But there are widespread expectations that the market may move into a small surplus next year due to the weak global economy and rising supplies outside OPEC.

Major data releases of the week:

21 November 2023, Tuesday

–FOMC Minutes: These minutes are released a day early due to Thanksgiving on Thursday. The Fed struck a more neutral tone at this meeting and kept rates unchanged. But since then, data has disappointed and Fed officials have said they want to see more soft data to end policy tightening.

22 November 2023, Wednesday

-UK Autumn Budget Statement: No major changes are expected by Chancellor Hunt.UK borrowing is projected to have come in lower and revenues higher due to elevated inflation. But there will probably be limited, if any, room for tax cuts. 

-US Durable Goods: Expectations are for a -3.1% m/m fall in October, a sharp drop after the 4.6% in the prior month. Economists say that the Boeing order book will act as a drag. These figures have been volatile recently so focus may be on the core measure which excludes transport and has been performing better.

23 November 2023, Thursday

-Eurozone PMIs: The outlook remains downbeat with manufacturing at 43.1 and services at 47.8 in October. Growth in new orders continues to fall as internal and external demand remain soft.

-US Initial Jobless Claims: Claims hit a three-month high last week, while continuing claims are rising. This points to companies’ increasing unwillingness to hire workers and suggests the labour market is cooling.

24 November 2023, Friday

–German IFO Business Survey: Morale edged up for the first time in six months in October. But the mood remained subdued, with the low level of the index pointing to a second half contraction. Economists say a second recession inside a year still seems likely.