Week Ahead-ECB meeting, flash PMIs, US PCE, Middle East in focus
The market will continue to monitor the crisis in Israel and Gaza amid lingering fears of a wider conflict. Investors will also focus on the European Central Bank rate decision, global flash PMIs and a key U.S. inflation reading this week.
The ECB is widely expected to leave rates on hold after 10 straight rate hikes and retain a mild tightening bias at Thursday's meeting. Barring any surprises, it should be a non-event.
The euro zone economy has struggled in recent months, so the release of flash PMIs could impact expectations on how long the ECB remains on hold before it starts cutting rates . Flash EZ consumer confidence and the German Ifo are the other data highlights. UK data includes flash PMIs and employment.
The key event in the U.S. will be the release of the core PCE price index, the Federal Reserve's favoured inflation gauge. Advance Q3 GDP is also on tap; if it meets or beats forecasts of a 4.1% rise, it will remind the market why the Fed believes interest rates can remain "higher for longer".
Other U.S. data includes S&P Global flash PMIs, durable goods, new home sales, and final October University of Michigan consumer sentiment. There will be no Fed comments due to the blackout period before the Oct 31-Nov 1 FOMC meeting.
It will be a quiet week in China, with only industrial profits scheduled. Similarly, Japan only has flash PMIs and Tokyo October CPI due.
In Australia, Q3 CPI will be scrutinised on Wednesday after the Reserve Bank of Australia's October meeting minutes, released last week, were more hawkish than expected . That prompted the market to price around a 30% chance of a rate hike at the Nov 7 meeting from around 15% before. If the weighted median and trimmed mean CPI come in hotter than expected, the RBA will likely see a 25 basis-point rate hike to 4.35% as the policy move of least regret.
There is no data of note out of New Zealand or Canada in the week ahead, but the Bank of Canada has a policy meeting on Wednesday. Bets on a rate hike have fallen following unexpectedly soft inflation data last week .
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