The main economic event this week was once again from inflation data, but not from the US. The UK is seeing its highest inflation in 41 years and that will put pressure on the BoE to hike rates more aggressively. Stagflation risks are growing for the UK’s economy. The Canadian inflation print surprised to the upside too, but remember that the BoC projected a recession for 2023, so this one print should not change the present outlook for the CAD. Finally, US Retail Sales came in higher than expected showing confidence from the US consumer, but it remains to be seen whether this will materially impact the Fed’s rate outlook.

Other key events from the past week

• CAD: Inflation focus, Nov 16: The CAD headline inflation print came in higher than expected with the trimmed mean at 5.3% vs 4.8% expected. This gave some initial CAD upside that quickly faded. This is probably not enough to change the BoC’s latest dovish tilt.
• USD: US Retail sales, Nov 16: The US retail sales print rose to 8.3% from the expected 6.9% as the US consumer showed signs of strength. Although in principle, this is enough to support the Fed hiking narrative it did not impact STIR market pricing at the event, and USD strength was capped quickly post-release.
• GBP: Inflation surge, Nov 16: UK inflation surged higher in the UK with the headline rising above 11% from the expected 10.7%. There is now roughly a 50/50 chance of a 75bps hike at the BoE’s December 15 meeting.

Key events for the coming week

• NZD: Interest Rate Meeting, Nov 23: At 01:00 UK time the RBNZ will meet. Expectations are for a 75 bps rate hike from economists, but STIR markets see only a 43.4% chance of a 75bps hike, so the chances of a surprise are high.
• Stronger seasonal approach for copper: Will copper prices move higher from here?
• S&P500: US November PMIs, Nov 23: There is a slew of European and UK PMIs on Wednesday next week, but the US PMI print will be the last at 14:45. Watch out for a big miss in the data to potentially support the S&P500.

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