This week will kick off a data deluge in the wake of Congress’ temporary funding deal last week which ended the record long 43-day federal government shutdown. The main event for this week will be Thursday’s employment report for September. As noted previously, we expect headline (+60k forecast vs. +22k previously) which should keep the unemployment rate unchanged at 4.3%. Average hourly earnings growth likely cooled to 0.2% m-o-m. On Oct & Nov US macro data, our base case is that the Fed will get the September employment report and the establishment survey portion of the October employment report before the December FOMC meeting, but the November report seems unlikely to come out prior to the Fed’s 10 December meeting. On the inflation side, September PPI and import prices (and potentially October PPI) will likely be released in time for the 10 December meeting, but November CPI, which was originally scheduled to come out the same day as the Fed’s rate decision, is unlikely to be available before the meeting. We have the crucial FOMC minutes of Oct meeting on Wednesday. We think that there are three topics dividing the Committee. a. Policymakers have different views on the balance of risks between labor markets and inflation. b. There is a disagreement on how restrictive monetary policy is. c. The implication of the lack of official data due to the government shutdown is important. We believe in absence of US economic data specifically the Nov and Oct NFP data, Oct & Nov CPI, Fed might be on a hold in it’s 10th Dec meeting. Recent Fed speak has been hawkish & it makes sense to drive slow in foggy conditions. Regarding future rate cuts in CY26, we still see 3 cuts of 25 bps each but timing is uncertain for now. Our base case is 25 bps cut each in Jan, March and June in CY26. This will bring the terminal rate to 3.15. In this week's auction of US dated treasuries, we have 16 BN USD supply of 20yr UST on Wednesday & 19 BN USD of 10 Year TIPS on Thursday. In US macro data, we have Univ of Michigan, existing home sales & initial jobless claims. In RoW macro data, we have Canadian Oct CPI on Monday which is expected to come at 2.1% with upside risks. We also have the crucial UK Oct CPI on Wednesday which is likely to show a softer reading of 3.5% on the headline CPI & 4.4% on service inflation. We see BOE cutting rates in Dec'25 and Apr'26. In Japan, we have Q3CY25 GDP data on Monday which is expected to come weak at 2% because of temporal factors. We also have Japanese CPI reading on Friday expected to come sticky at 3%. More important for the Bank of Japan, the core-core CPI, i.e. excluding fresh food and energy probably edged up to 3.1% from 3.0%, as companies adjusted prices at the start of the fiscal year’s second half. The data should strengthen the BOJ’s confidence that inflation is firm enough to justify further paring back stimulus. We expect the BOJ to raise rates by 25 basis points in December, though missing US data and political pressure from Prime Minister Sanae Takaichi’s pro-stimulus administration could push the move to January.
