Due to US government shutdown, we don’t expect CPI, PPI, initial jobless claims and US retail sales data this week to be released. The main focus in Fed speak this week will be Chair Powell’s speech on the economic outlook and monetary policy at the NABE meeting on Tuesday. We expect him to again focus on the risk management strategy of managing more downside risks to employment than to prices. In US macro data, we have secondary data such as NFIB small business survey, Empire state survey, Philly Fed survey etc. With US government shut down continuing, Trump administration has already started firing employees during the shutdown itself. In addition, Office of Personnel Management (OPM) Director Kupor said last week that roughly 150k federal workers had accepted deferred resignation offers and, of those 150k, 100k would leave the government at the end of September. This suggests that October NFP (scheduled to print in early November) is likely to be weighed down by 100k due to DOGE-led deferred resignations. Private indicators of employment has been anyways soft as seen in ADP, Intuit etc. Combining all above facts, we see unemployment rate rising to 4.5% in Oct NFP itself. Hence though core CPI might be rising too but the rise in UR might be more than the Fed’s comfort. Hence, we see front loaded cuts of 25 bps each in the next four Fed meetings. Adding to above policy mix is the recent 100% tariff announced by Trump on China. This too might add to risk sell off as seen on Friday adding to financial stability woes. On tariff front, next week will be news flow driven. As long as China does not reciprocate by announcing another set of tariffs, there is a small chance that Xi Trump meeting happens in end Oct at the ASEAN summit in South Korea. In RoW events, France continues it's merry go round of PMs with no end in sight to the budget approval process. We believe even a snap election cant solve the issue as per recent opinion polls. In European macro data, we have German Zew data as well as Euro area industrial production. In UK macro data, we have the important labor market data as well as the GDP data for August. In Chinese export data due on Monday, we see a strong export data due to shifting of Chinese export data to non US destinations showing trans-shipping as well as China's push to cultivate trade with other partners.
