## United States
As we approach the end of a highly volatile two-week period, the focus turns to U.S. employment data. The figures are expected to present a distorted snapshot of weakness, influenced by hurricanes and other temporary factors, complicating how markets might react given looming global events and economic indicators. These include the potential for geopolitical tensions involving Iran and Israel, the upcoming U.S. elections, and multiple central bank meetings. The U.S. dollar remains relatively firm against G10 currencies, and emerging market currencies are mostly weaker, except for a slight uptick in the Mexican peso. Despite a sharp decline in equities, the 10-year U.S. Treasury yield is up one basis point to 4.30%. Oil prices have been on the rise due to possible retaliatory actions by Iran, with December WTI up nearly 2.8%, reclaiming levels above $71.
Today, eyes will be on the October U.S. jobs report, expected to show exaggerated weakness due to external factors. Private sector employment is forecasted to gain about 70,000 jobs, contrasting sharply against ADP’s higher estimate of 233,000, reminiscent of discrepancies witnessed back in July. U.S. market indicators will also include the final October manufacturing PMI and ISM figures, which could see initial volatility as markets digest the information.
## Eurozone
The European economic calendar offers a breather today, allowing us to reflect on major developments. The European Central Bank’s outlook remains under the microscope, with markets previously factoring in a half-point rate cut in December, which has now been reassessed due to a stronger-than-anticipated Q3 GDP and signs that Germany is dodging a recession. The U.S. dollar’s premium over the euro fell by about eight basis points this week, offering some support to the euro.
Concurrently, the response to the UK’s recent budget revealed sentiments towards Gilt yields, which climbed as investors squashed positions in anticipation of the announcement. Such movements have broader implications across the European markets, affecting currencies and rates.
## United Kingdom
The UK’s fiscal outlook faces scrutiny following the latest budget announcement. Rising Gilt yields—up about 25 basis points this week alone—reflect market reactions to increased borrowing needs, shaking the sterling’s support. Despite expectations of a slowdown in the Bank of England’s rate cut trajectory, sterling is struggling to find its footing amid the evolving economic landscape. Market forecasts indicate a quarter-point rate cut next week, with continued caution expected in the rate adjustment process.
## China
China’s economic indicators received a positive nudge with the Caixin manufacturing PMI slightly above expectations at 50.3, demonstrating an improvement from September’s 49.3. The upward movement aligns with expectations of a fiscal package announcement from the National People’s Congress. Currency-wise, the yuan saw fluctuations, reaching a six-day low before recovering. The People’s Bank of China set the dollar’s reference rate at CNY7.1135, a marginal adjustment from the previous day’s figure.
## Japan
Japan’s final October manufacturing PMI came in at 49.2, a small uptick from an earlier estimate, yet the lowest since the end of the first quarter. The Bank of Japan continues to focus on price levels, as Governor Ueda emphasizes the connection between exchange rates and monetary policy. The swaps market reflects this stance, with expectations for about 8.5 basis points of tightening, a minor increase from earlier forecasts.
## Canada
Canada’s October manufacturing PMI reflects cautious optimism, staying slightly above 50. The Bank of Canada has aggressively cut its target rate by a total of 125 basis points this year, and the swaps market is already factoring in the possibility of further easing. The Canadian dollar faced pressures amid risk-off market dynamics, nearing yearly highs against the U.S. dollar from early August.
## Australia
In Australia, the final manufacturing PMI reported at 47.3 is slightly better than both its initial estimate and September figures. Consumer demand is showing signs of softness, as household spending edged down a touch following a revised growth in August. With the Reserve Bank of Australia’s meeting on the horizon, there is no anticipation of rate cuts, and markets are projecting the first possible cut as far off as the second quarter of 2025.
## Mexico
The Mexican peso has demonstrated relative strength compared to other Latin American currencies, buoyed by short-covering and broader market adjustments in anticipation of geopolitical and U.S. election tensions. While upcoming economic reports may not heavily impact the peso, its direction will be more influenced by U.S. jobs data and broader dollar sentiment. Next week, all eyes will be on Brazil’s anticipated 50 basis point rate hike, following an initial move in September, as the region navigates a challenging economic landscape.
