Key Points to Watch Out For:
- The RBNZ is expected to cut rates by 50 basis points at its final policy meeting of the year.
- PCE inflation data will be pivotal in determining if the Fed cuts rates in December.
- Eurozone year-on-year CPI will be critical for the ECB’s decisions in December.
RBNZ Readies for Its Third Rate Cut
The Reserve Bank of New Zealand (RBNZ) will kick off the year-end monetary policy meetings of major central banks with its decision on Wednesday, November 27. Having shifted policy significantly earlier this year, even before the Federal Reserve began easing, the RBNZ appears ready for another bold move. With the annual CPI rate at a manageable 1.3%, inflation estimates near 2.0%, and sluggish GDP growth, the central bank has little reason to hold back. A 50 basis point cut is already priced in, though speculation persists about a 75 basis point cut, particularly given that the next meeting isn’t until February. A sharper-than-expected cut could push the New Zealand dollar to fresh 2024 lows against the U.S. dollar, with recovery proving challenging.
U.S. Economic Data Flood Ahead of Thanksgiving
The U.S. economic calendar is packed this week, with a wave of data releases before markets quiet down for Thanksgiving. While monetary policy is regaining focus following Donald Trump’s surprise presidential victory, attention is now on the Fed amid uncertainty over how many more rate cuts it can deliver before Trump’s inflationary policies take hold. Expectations for a 25 basis point cut in December currently stand between 55% and 60%, with hawkish Fed rhetoric dampening the odds. A stall in core inflation progress has also added caution. Fed Chairman Jerome Powell recently hinted at a likely pause in rate cuts, tying the December decision to forthcoming inflation and employment data. The PCE inflation report, due on November 27, is pivotal. Powell has projected a rise in PCE from 2.7% to 2.8% year-over-year, with the headline PCE expected to climb from 2.1% to 2.3%. If these figures align, the Fed may still have room for a December rate cut.
If the PCE data does not shed light on the Fed’s next move, investors will turn to the minutes of the November policy meeting for insights. Other key data on November 27 includes personal income, consumer spending, durable goods orders, and the second estimate of Q3 GDP growth. Earlier in the week, on November 26, home sales and the Conference Board’s consumer confidence index will draw attention. Markets will be closed on November 28 for Thanksgiving, with early closure on November 29, leaving little trading activity. However, the Chicago PMI release will attract some attention. The U.S. dollar has extended its post-election recovery, though excessive gains leave it vulnerable to sharp corrections if economic data disappoints.
Eurozone CPI Under the ECB’s Spotlight
Despite growing pessimism about Eurozone growth, the ECB has resisted market expectations for a 50 basis point rate cut in December. Recent increases in negotiated wages and persistently high services inflation (around 4%) have tempered the ECB’s willingness to cut rates prematurely. Market odds for a 50 basis point cut in December remain at 25%, though ECB rhetoric suggests this is likely overstated.
The November CPI figures on November 29 will be closely scrutinized. Headline CPI accelerated from 1.7% to 2.0% in October, and another increase to 2.4% is expected. Such a rise could undermine expectations for a deeper cut and offer some support to the euro. Ahead of the CPI figures, Germany’s Ifo business survey on November 25 will be monitored for signs of how political uncertainty is affecting business confidence in Europe’s largest economy.
Australia’s Dollar Faces CPI Challenges
Australia’s latest CPI figures could add pressure on the Australian dollar, which has been struggling against a stronger U.S. counterpart. October CPI, expected on November 27, is projected to rise to 2.3%, up from 2.1% in September. Such an increase may provide temporary support for the Australian dollar. The Reserve Bank of Australia is unlikely to cut rates before May 2025, given current inflation trends near the lower end of its 2–3% target band. Data on capital spending for Q3, due November 28, will further clarify economic momentum heading into 2024.
Canadian Dollar Looks to GDP Data
The Canadian dollar remains under pressure, ranking as the third worst-performing major currency in 2024 due to the Bank of Canada’s aggressive rate cuts. A fifth consecutive rate cut is likely in December, though bets for a second 50 basis point cut have diminished after higher-than-expected CPI data. The release of Q3 GDP data on November 29 could trigger significant market reactions if it contains surprises, though it is unlikely to alter the Bank of Canada’s stance.
Conclusion
Adding to the action on November 29 will be Tokyo’s CPI data, which could influence expectations for a December rate hike by the Bank of Japan. Inflation in Tokyo recently fell below the BOJ’s 2.0% target, though policy makers remain committed to raising interest rates. Stronger-than-expected data would strengthen the yen and bolster expectations for a late-year policy move. This week’s data-heavy schedule, coupled with geopolitical developments and central bank decisions, sets the stage for potential market volatility heading into December.
