Week of DECEMBER 1

A week was relatively quiet, with the main events being the UK Autumn budget and lower trading volumes due to the Thanksgiving holiday.

The week ahead sees monthly PMI figures from major economies, Eurozone inflation and more delayed data from the US.

Week in Review

The central theme of the week was a shift in sentiment regarding the Fed's outlook, with the futures market pricing in an over 80% chance of a cut at the December meeting by the end of the week. Improving market sentiment was also supported by initial reports of progress towards a peace deal in Ukraine, providing both data and geopolitical support for risk appetite. Markets saw little reaction to the delayed US data that came out on Wednesday, as durable goods orders for September were in line with expectations.

In the UK, the main event was the much-anticipated Autumn budget, which got off to a glitchy start as the OBR published some of its forecasts ahead of the official announcement time. However, once the Chancellor presented all the details to Parliament, the markets surged, feeling relieved that the mix of tax increases wasn't as drastic as anticipated. The Chancellor elected not to proceed with new taxes on banks or betting, allowing both sectors to rally above the market. An increase in the projections for fiscal headroom next year also helped calm deficit hawks, and the pound was supported in the latter half of the week.

The RBNZ cut rates by 25 bps as expected but gave a surprisingly hawkish tone when revealing that holding rates unchanged had also been discussed. Acting Governor Christian Hawkesby said that the labour market was stabilising, leading markets to assume that the bank's rate-cutting cycle might end.

Biggest Market Movers

• The dollar declined throughout the week, posting its worst performance in four months amid rising bets that the Fed will cut rates in December.
• Crude prices declined amid optimism around a peace deal in Ukraine but reversed higher late in the week after Vladimir Putin gave some hardline comments.
• The NZDUSD was the strongest performer among the majors after the RBNZ's hawkish rate cut.
• Gold trended higher as markets returned to pricing in a December rate hike, while silver revisited record highs

Top Events in the Week Ahead

The coming week will see the release of more delayed US data, including the crucial PCE price index, which is the Fed's preferred inflation metric. Usually, NFP figures are released on the first Friday of the month, but they will be delayed to 16 December due to the lingering effects of the government shutdown. Markets will also be paying close attention to developments in peace negotiations in Ukraine.

Key PMI Releases

Markets will start the week focused on PMI figures from China and Europe to get a sense of economic growth. China's November RatingDog (formerly Caixin) manufacturing PMI is projected to stay in expansion. Meanwhile, the official NBS Manufacturing reading is projected to remain in contraction, highlighting the divide between large and smaller businesses. US PMIs are expected to improve but remain in contraction, while the Eurozone manufacturing sector's return to contraction is expected to be confirmed.

Eurozone Inflation On Target

The ECB is expected to stay on the sidelines as long as inflation in the shared economy stays near target. But concerns over hot services could keep investors focusing on the data. Country-level CPI figures released on Friday were either in line with or below expectations. The euro traded mainly up in the week but found resistance at 1.1600. A breakout might open the food to 1.1700, while failure to move higher might shift focus to 1.1500.

US Inflation Still Hot

Markets have been wishy-washy on expectations for a Fed rate cut in December, going from almost certain to unlikely back to high probability. The Fed's preferred inflation measure on Friday could provide some guidance, with markets expecting the core PCE price index to rise 2.8% from 2.7% prior. This could jostle markets a bit, as the Fed will be in its pre-rate decision blackout, so there won't be much commentary from FOMC members to clarify how the data will affect the policy outlook. A cooling inflation might push gold past the regional peak of $4250 an ounce and towards the record high, while hotter-than-expected figures might see the yellow metal reverse to the $k handle.

Other Events and Earnings

Monday has UK mortgage approvals. For Tuesday, Japanese consumer confidence is expected. Australia's Q3 GDP figures come out on Wednesday. Thursday includes Australian trade balances. Friday sees Canadian labour data. Companies updating investors this week include CrowdStrike, Marvell, Salesforce, Kroger, and Balfour Beatty.