The bullish surge in stock markets to finish last week was mightily impressive and has seen little pushback. Treasury yields moved sharply lower, and this has fuelled those interest-rate sensitive growth stocks in the Nasdaq. The tech-heavy index rose by the most since March. The Dow, laden with more value-based companies, underperformed. But this index is still up roughly 17% from its recent lows and is closing in on what would be defined as a bull market.

After the downside US inflation surprise, the key question is how sticky price pressures stay at historically very high levels. One data point doesn’t make a pivot. But certainly, there were some encouraging signs in the inflation numbers with easing core pressures.

The dollar suffered its worst week since March 2020. A 50bp rate hike by the Fed in December is priced in now by money markets after four 75bp moves in a row. Will the Fed want to reinforce the loosening of financial conditions that we have seen since last Thursday? This would undermine all their hard work in trying to tame inflation. So, we could get some pushback from the multitude of Fed officials on the wires this week which would give some support to the USD.

CPI data will be released from various other countries in the coming days, including the UK. We should see the peak in price pressures here due to the energy price guarantee over the coming two quarters. The usual mid-month data deluge also features jobs data, retail sales plus the finance minister’s Autumn Statement. The new administration should spell out its fiscal plans which are widely expected to include tax increases across the board to fill the £50 billion hole in the country’s public finances. Cable has enjoyed the weaker dollar dynamics, but soft data will reinforce the picture of a weak economy which is set to worsen into the new year.

Major risk events of the week

15 November 2022, Tuesday:

–UK Jobs: Consensus sees an unchanged unemployment rate of 3.5%. The previous print was led by weak participation rather than strong job creation which may continue. Pay growth is expected to remain elevated, even though hiring measures have begun to turn lower.

16 November 2022, Wednesday:

–ZEW German Business Survey: The economic outlook in the eurozone’s biggest economy remains grim as the energy crisis is still a major uncertainty. Price brakes have been announced for gas and electricity which may help stabilise sentiment. But analysts see a high chance of GDP falling over the next six months.

–UK CPI: Expectations are for an annual rise to 10.8% from 10.1% in September. The core y/y rate is seen dropping to 6.4% from 6.5% due to negative base effects. Food inflation and a jump in utility bills due to the much higher energy price guarantee are seen as the main drivers in the headline print. The MPC forecasts CPI will fall from early next year.

–US Retail Sales: Analysts estimate the headline print will rise 0.8% m/m in October after a flat reading in September. Strong wages and savings are helping bolster activity. Tighter monetary policy and elevated inflation are liekly to weigh in the coming months.

17 November 2022, Thursday:

–UK Autumnal Statement: The government is widely expected to tighten the purse strings meaningfully. This will be split between tax rises and spending, with numerous possible measures touted over the past few weeks. The announcements will be accompanied by new forecasts from the OBR, something missing from the doomed “mini-Budget”.

18 November 2022, Friday:

-Japan CPI: Expectations are for a further rise above 3% y/y in October. Utilities and other imported goods are rising, although the print will still be well below other countries. Any upside surprises may fuel more speculation about the BoJ tweaking its dovish stance. The yen would get a boost from this, adding to its stellar start to the month.

-UK Retail Sales: The annual rate is expected to remain in deeply negative territory. Analysts see a small bounce for October, given September included the Queen’s funeral. But volumes have fallen in nine of the last 11 months reflecting the cost of living crisis.