Daily Flows & Insights – The Week Ahead & U.S. Labor Market Weaker Than Expected

Daily Market Update

  • Last Friday, the standout term deposit rate reached 5.70% for a 5-year term.
  • Domestic NCD margins stood at +45, while those seeking higher yields turned to foreign counterparties, who were offering rates of up to +50 for 3 months.
  • Today, market activity may remain subdued as participants opt to await the RBA’s announcement.

U.S. Labor Market Weaker Than Expected

  • In October, U.S. employers added 150,000 jobs, marking a decline from the previous month and falling short of expectations (estimated at 180k).
  • The report spurred positive sentiment in U.S. futures, suggesting that investors believed the Federal Reserve had completed its tightening measures.
  • Although the unemployment rate rose to 3.9%, earnings growth slightly underperformed, registering at 0.2%.
  • The ongoing steady pace of hiring has bolstered consumer spending, a crucial driver of the economy.
  • FOMC member Kashkari remarked on the slowing labor market, which aligns with the Fed’s objectives, and observed that balance is returning to the economy.
  • This data further fuelled the prevailing market narrative that the Federal Reserve had concluded its tightening efforts.
  • Despite the U.S. developments, uncertainty looms over the upcoming RBA meeting in Australia.

The Week Ahead

  • The primary focus of the week will be the RBA meeting scheduled for Tuesday.
  • A majority of economists are anticipating a rate hike, with cash rate futures pricing in a 48% probability of an increase.
  • The unexpected uptick in Q3 2023 inflation has prompted most economists to factor in a November interest rate hike.
  • This week, China’s inflation rate is set to be released, with market expectations forecasting a 0.2% month-on-month increase.
  • On Friday, the RBA’s Statement on Monetary Policy (SOMP) is due for release, and it is expected that the bank will need to revise its near-term inflation forecasts in response to the Q3 inflation surprise.
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Curve Team
Jack Pedersen