Last week finally brought a degree of relief to global markets as the US government ended its shutdown after several tense weeks of political deadlock. The reopening restores some certainty to the world’s largest economy, but it also leaves a significant data gap. Many key reports that were scheduled during the shutdown were either delayed or cancelled, which means policymakers, especially at the Federal Reserve, will be making decisions with a limited view of recent economic conditions.
For now, the market is working under the assumption that most of October’s data would have shown softer performance. That expectation helps explain why the US Dollar has been under mild pressure even though the government is now back up and running.
Tuesday: US Data Returns
Tuesday brings the first batch of post-shutdown data. US industrial production is expected to remain flat at 0 percent. Factory orders for August are forecast to rise by 1.4 percent, which is a more positive sign. These figures are not likely to move the market in a major way, but they will allow analysts to rebuild a clearer picture of US economic momentum after several weeks of uncertainty.
Wednesday: Inflation Data for the UK and Eurozone, plus FOMC Minutes
Attention then turns to the UK where CPI inflation is expected to fall to 3.5 percent from 3.8 percent. Core inflation is forecast to edge down to 3.4 percent. Lower inflation is positive for households, but it is not positive for Sterling because it reinforces the idea that the Bank of England can cut rates soon.
Eurozone inflation is also due and is expected to remain unrevised at 2.1 percent. This keeps the European Central Bank close to its target and should help stabilise the Euro.
Later in the day, the Federal Reserve will release the minutes from its October meeting. Markets will be watching closely to understand how seriously the Fed is considering a rate cut in December, especially after the disruption caused by the shutdown.
On Wednesday evening, NVIDIA will report earnings. Given the nervousness in equity markets recently, US tech earnings could influence broader market sentiment as we move into December.
Thursday: Labour Market Readings
Thursday brings the release of the delayed September non-farm payrolls report. Even though the figures are now backdated, they will still provide valuable insight into the health of the US labour market. Weekly jobless claims are also due and are expected to increase. A weaker labour outlook would likely put pressure on the US Dollar and strengthen expectations of a rate cut before the end of the year.
Friday: UK Retail Sales and Flash PMIs
The week finishes with UK retail sales which are expected to remain flat at 0 percent. This indicates stagnant consumer spending during a period when cost pressures remain high. We also have flash PMI data for Europe and the UK, which will help indicate business confidence heading into the final quarter.
Summary
The end of the US shutdown is a positive turning point, but the uncertainty is far from over. Incomplete US data, shifting inflation trends and upcoming central bank decisions mean that volatility is still likely over the coming weeks. Sterling remains vulnerable ahead of the UK Budget, the Euro is firming as inflation stabilises, and the US Dollar is still searching for direction after a turbulent month.
GBP/EUR 1.1334 GBP/USD 1.3148 GBP/AED 4.8325
GBP/AUD 2.0167 GBP/CHF 1.0452 GBP/CAD 1.8446
GBP/NZD 2.3184 EUR/USD 1.1590 GBP/ZAR 22.4773