Focus on central bank remarks

OVERNIGHT

Equity markets in the Asia-Pacific region were mixed with falls in Japan but rises in other jurisdictions including China. Benchmark US 10-year Treasury yields are little changed overnight, staying below 4.40% close to recent lows. In the UK, the British Retail Consortium’s shop price index released overnight revealed inflation at a 17-month low of 4.3% in November, down from 5.2% in October. Bank of England MPC member Dave Ramsden warned, however, that inflation has become more ‘homegrown’ and that policy will need to be ‘sufficiently restrictive for sufficiently long’ to return inflation to the 2% target. 

THE DAY AHEAD

Part of the focus this week in the UK will continue to be on the Autumn Statement which has been broadly welcomed by business organisations. There are several BoE ratesetters scheduled to speak this week and it will be interesting to hear any initial views on whether the fiscal measures announced might change the inflation outlook. Today, external MPC member Jonathan Haskel is scheduled to speak about inflation at 17:00GMT. The House of Commons Treasury Select Committee will also be questioning the Office for Budget Responsibility today ahead of Chancellor Jeremy Hunt’s appearance on Wednesday.

In the US, a speech on the economic outlook by the Fed’s Waller is scheduled and could be a key focus. While the Fed is highly unlikely to change interest rates at its last policy meeting of the year next month, markets will be listening carefully for how strongly policymakers push back against expectations for lower interest rates in 2024. The Fed’s Goolsbee, who is considered to be a dovish member, will also deliver opening remarks at a separate event.

ECB speakers today include German central bank head Nagel and Chief Economist Lane. Nagel remains open to higher interest rates, while Lane is closer to the consensus middle part of the spectrum which likely favours maintaining interest rates at current levels for the period ahead. ECB President Lagarde will also provide pre-recorded remarks today.

Economic data today include Eurozone M3 money supply growth which is expected to remain negative on a year-on-year basis. The Conference Board will release US consumer confidence which is forecast to fall for a fourth month in a row in November, suggesting consumer spending is set to slow after stellar growth in Q3. 

MARKETS

UK gilt yields reversed some of the gains seen last week which followed stronger-than-expected survey data and reaction to the Autumn Statement. The 10-year gilt yield closed down 7bp to 4.21% yesterday, broadly tracking its US and German counterparts. In FX, the pound remained above 1.26, trading just below yesterday’s high of 1.2644.