Week in review

• Eurozone composite PMI for November rises to 55.8
• U.S. composite PMI for November dips to 56.5
• Australia capital expenditure 3Q falls 2.2% q/q

Week ahead

• Australia private sector credit
• Australia 3Q real GDP
• U.S. nonfarm payrolls

Thought of the week

A group of hawks is called a kettle and the kettle in the U.S. Federal Reserve (Fed) is getting louder. An increasing number of committee members are voicing their concerns over the inflation outlook and whether the planned path for the tapering of bond purchases is appropriate. This is important as a faster taper would imply an earlier start date for lift-off in interest rates. If the current pace of tapering was doubled it would see the process end in March, potentially allowing the Fed to raise interest rates in June. This would be in line with current market pricing. It also explains the recent strength in the U.S. dollar and the U.S. dollar index rising almost 3% since the start of November and 5% in the last year. There is still a high degree of uncertainty around the U.S. inflation outlook when it comes to the labour market and the persistence in inflation pressures. The December Fed meeting is shaping up to be an important one for markets and the hawks.

U.S. dollar has been gaining on rate hike expectations

U.S. dollar index

Source: FactSet, J.P. Morgan Asset Management. Data reflect most recently available as of 26/11/21.
All returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.

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