The Week Ahead
13 November

The Week Ahead – 13 November

Financial markets were a little mixed over the week. The Aust market was impacted by the shorter trading week along with the move by the RBA to increase cash rates by a further 0.25% to 4.35%. The increase was expected by many investors in the market given that inflationary pressures remain challenging. 

The tone from the RBA continues to point to the fact it may not be done with rate hikes. We certainly have not ruled out one further local rate rise, but now expect the RBA will at least be a hold until it meets again early in 2024. While there are several exogenous factors that have contributed to the higher and sticky inflation levels, we would also argue that poor fiscal policy (Federal & State) as well as the lack of flexibility in regard to the legislative agenda has also impacted the inflation outlook. 

This is particularly the case when considering the impact that higher (domestic) energy prices have contributed to inflationary pressures given that crude oil prices have fallen -12.3% m/m. Despite the move by the RBA, the weakness in the A$ (v’s US$) has continued. With ongoing economic data continuing to point to a further slowing of the global economy the near term pressure on commodity currencies will remain. 

In addition, reduced demand for iron ore from China as well as comments regarding spot prices is also weighing on A$ sentiment. In the US this week, the focus will be on both the CPI and PPI data releases. Headline CPI data is expected to moderate further (f’cst 3.3% y/y, -0.4% pcp), while Oct PPI data is f’cst to decline 0.40% (pcp) to 0.1% m/m and 1.9% y/y (-0.3% pcp). In addition, retail sales data for Oct (f’cst 0.2%, v’s 0.6% pcp) will provide a gauge as to the strength of the consumer along with data around Oct housing starts and building permits, while jobless claims are set to remain steady (1853k v’s 1834 pcp).

Domestically, the focus will be on the CBA household spending data along with WBC Consumer Confidence numbers in addition to the 3Q23 Wage Price Index, which is pointing to a further 0.3% increase (to 3.9% y/y), while the Un rate is f’cst to rise to 3.7% (+0.1% pcp). So more issues for the RBA to deal with. 

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