In this weekly market outlook, the host reviews upcoming central‑bank actions and key macro data for the week of October 30, 2022. He notes an 81% market probability that the Federal Reserve will deliver a fourth consecutive 75‑basis‑point hike, pushing U.S. rates toward 3.75‑4.0%, and discusses the importance of the Fed’s forward‑guidance tone, citing a Wall Street Journal piece by Nick Timoros that suggests some officials may favor a smaller 50‑bp move in December. The video references Goldman Sachs’s updated Fed call, which now sees a 5% terminal rate with a path of 75‑bp now, 50‑bp in Dec, and 25‑bp in Feb and Mar, justified by persistent inflation, cooling needs, and avoiding premature easing. The host also highlights an ING “crib sheet” on policy scenarios and a linked Goldman research note. He then turns to the Bank of England, where a 50‑ to 75‑bp hike is expected amid mixed signals from recent speeches and a stronger pound. The Reserve Bank of Australia is projected to raise rates by 25 bps to 2.85%, its highest since 2013, with its August forecast showing inflation peaking near 8% later in the year. The week’s macro calendar includes Eurozone flash GDP and CPI (CPI expected at 10.3%), Chicago PMI, Chinese data, ISM Manufacturing, ADP employment, BLS non‑farm payrolls, jobless claims, and UK industrial orders and German trade data. Corporate earnings slated for the week include Pfizer, BP, Eli Lilly, AMD, Qualcomm, Starbucks, and Peloton. The host encourages viewers to like, subscribe, and follow his LinkedIn for the research links.
Chapters
Okay, welcome back to the channel. I hope you had a fantastic weekend. Going to talk about in this outlook for the week rate hikes expected from the FOMC, the Bank of England, the Reserve Bank of Australia. We've also got non-farm payrolls coming out this Friday, still more corporate earnings on the slate, and we've also got some important eurozone flash data in the form of GDP and inflation metrics on Monday. So let's dive straight in and start with the Fed. Before I begin, if you're new to the channel, don't forget to like and subscribe. More videos come out throughout the week, so hopefully you find them super useful. But looking at the Fed then and Jerome Powell, markets are currently have an implied probability of around 81% for another 4th consecutive 75 basis point rate hike. That would take interest rates in the US up to 3.75% to 4%. The Fed continues to believe that inflation risks are weighted to the upside, so hence the rationale for another large clip response in raising rates. The ongoing rate hikes are seen as appropriate— this is their language— and that a sustained period of below-trend growth is required to get inflation under control. So this was that kind of idea a few weeks ago about forcing a recession almost to tame demand and consequently inflation. Now, one of the things to watch here is going to be the subsequent communication that they give in their forward guidance, because you remember last week we had an article out of the Wall Street Journal and a person called Nick Timoros— probably never heard of him, but he's super important. The reason why is he's gained a reputation as the Fed's kind of go-to guy. There's been a number of these types of journalists, particularly connected with the Wall Street Journal, who have the kind of ear of the Federal Reserve. and the central bank kind of indirectly uses them to drip feed in ideas into the market to almost desensitize reactions when the Fed then consequently comes out and makes a policy tweak. And that recent article has shifted the thinking a little bit. His article hinted that some officials are concerned that things are moving too fast, too quickly, and that they need to rein in the market a little bit, which means they remained open to the possibility of just a 50 basis point rate hike in December. So essentially, they don't want to get in this idea that they're pre-committed to just, you know, now that they've done the fourth 75, that this is a pattern that will continue forever. And much like what we saw from the ECB last week, where they dropped the word several from their key statement around future rate rises, it's a little bit of just softening of the rhetoric in a dovish sense about the future direction of travel with rates. It's going to go up, but perhaps we're getting towards the peak of the terminal rate of where interest rates effectively will, will hit their top, their upper bound. Now, the tone of the press conference, of course, is going to be particularly important. And we've got the jobs data on Friday. We've then got the midterms and then inflation metrics coming in the subsequent weeks. Some really key events coming up really to determine what the Fed are going to do for not just the December meeting and beyond this week, but further forward in time. With that, one thing to bear in mind is Goldman Sachs did come out and have updated their Fed call. They've in fact heightened the, the level of this terminal rate, so the peak for US interest rates, to now 5%. They've said the route to the new peak includes 75 this week, 50 in Dec., 25 in February, and a 25 in March. And so they've effectively highlighted 3 reasons for their rationale. Uncomfortably high inflation. Number 2, the need to cool the economy as fiscal tightening ends and price-adjusted incomes, price-adjusted incomes climb. And then 3, they're talking about trying to avoid a premature easing of financial conditions. If you did want to check out that full Goldman's report, then I have on my LinkedIn posted the fixed income end-of-week research note from GS. It's a really great read actually. It gives an overview summary of State of Play with the ECB. It has an update of what's happening at the moment, a check-in on China as well as the general fixed income space, talks about when will the Fed pivot, and then a really great summary snapshot of all of the major central banks and their outlook of what they're expecting for the period ahead. I'll drop that link into the comments section of this video. Otherwise, another useful thing for Amplify Me on LinkedIn, which I put lots of posts out on a daily basis, is a crib sheet that the Dutch bank ING have put together which looks at the potential scenarios for key areas of policy. So on the economy, inflation and growth, but on policy, things like interest rates and quantitative tightening, and then subsequent market implications. Really nice kind of bingo card-esque type approach, but super, super useful because it's just really digestible in this format. So do check that out as well on LinkedIn. But otherwise, let's move the, move the show on a little bit. We do also have the Bank of England this week, and that's expected to be a little bit more of a closer call. It's kind of a toss-up between 50 to 75 basis points. Really, there's been a number of things that have changed more recently. Recent speeches basically from policymakers have been signaling the markets are somewhat overestimating the amount of tightening left to come. Remember, we've seen big shifts in expectations for rates in the UK, given the whole debacle that we have with the very brief, um, Liz Truss government. A lot of policy U-turns have obviously taken place. The pound is considerably stronger than where we were prior to the last September meeting. We're now trading back to a 1.16 handle, where at the time, of course, people were very much talking about this parity conversation. Um, and latest data has not really provided a particularly clear justification for a faster rate hike. So the market's a little bit on the fence between going 50 or 75, and that generally means then we're probably likely to see quite a volatile initial reaction in sterling when this event happens in the second half of this week. The other thing then is the Reserve Bank of Australia. They're also expected to hike rates, but by a slightly smaller margin of 25 basis points. It would be the second straight quarter point rise for the bank. Uh, that would take the cash rate to 2.85%. That would be the highest level since around April of 2013. Later on in the week, separate event, they also— the RBA's quarterly update of economic forecasts comes out. And the central bank estimated in this August update that inflation would peak at just under 8% later this year. So looking out for revisions to those key factors on inflation. As far as the week is concerned, it's a busy one, in fact, from a calendar perspective. You can see here on Monday, You get the likes of Chicago PMI, there's some Chinese data overnight, and then key for the eurozone, you get the October flash, both GDP and CPI numbers. The pace of consumer prices in Europe is seen accelerating to another fresh record high of 10.3%, hence why we saw last week the ECB pull the trigger on a large, large-sized rate rise. Chief Economist Philip Lane does speak on Monday, Christine Lagarde, the president, speaks later on this week. Lagarde actually did tweet Of course, over this weekend on Saturday, that defeating inflation is our mantra, our mission, and our mandate. Because you remember, the euro actually weakened even irrespective of the fact that the ECB did a particularly large 75 basis point rate hike last week because of the slight revision to softening the rhetoric on future rate rises. So it looks like she's come out to kind of rebalance that with a slightly more hawkish inflation-centric tweet over the weekend to just keep things on an even keel as far as market expectations are concerned. So some key data to get things on Monday and then ISM Manufacturing on Tuesday, US ADP National Employment Wednesday, of course, front-running the, the official labor report from the BLS on Friday. Weekly jobless claims then come out on the regular on Thursday with the Bank of England rate decision. And then as I've just mentioned, alongside the the payrolls number on Friday. We also get a couple of European data prints in the form of industrial orders and also German trade data as well coming out to round off the week. Earnings-wise, yeah, we're over obviously the big tech and the big week for the S&P. So there are still kind of medium and large-cap companies coming out. Most of the big guns have already been and gone though, but the ones I'm watching would be Tuesday, Pfizer, BP, Eli Lilly. You've also got AMD after market on Tuesday. and then Qualcomm aftermarket on Wednesday is probably another one to keep an eye on. Starbucks and Peloton, always a spicy one, that's coming out on Thursday as well. But that's it. So again, if you're not already subscribed to the channel, please do hit that button. Leave us a comment if you have any questions, and I'll catch you again for the next session. All right, have a good week ahead.
