EUROPEAN SESSION

In the European session, the only highlight is the ECB rate decision. The central bank is widely expected to keep interest rates unchanged, while maintaining its data-dependent, meeting-by-meeting approach. Inflation accelerated to 3.8% in September, driven by energy prices, while core inflation showed more limited increases. Rising energy costs and the risk of second-round inflation effects remain hawkish risks but increased growth concerns and tighter credit conditions argue for caution.

Markets will focus on any signals about further tightening, with the December rate hike probability now standing at roughly 64%. France is likely to dominate the press conference, with traders looking for clues on whether widening sovereign spreads and fiscal uncertainty could prompt a more dovish ECB stance or potential intervention through the Transmission Protection Instrument (TPI). A hawkish surprise is unlikely in the current context.

AMERICAN SESSION

In the American session, we have the US GDP, the US PCE and the US Jobless Claims data. The US Q3 GDP is expected at 3.2% vs 2.2% prior, but it’s unlikely to change much for the Fed, as the central bank has already upgraded its growth assessment.

The same can be said about the US Core PCE since it can be forecasted almost accurately using inputs from the CPI and PPI reports. That’s why the CPI is always more important and the one that influences interest rate expectations the most. Nevertheless, the US Core PCE Y/Y is expected at 3.1% vs 3.0% prior, while the Core M/M mreasure is seen at 0.3% vs 0.2% prior. 

Initial Claims are expected at 198K vs 194K prior, while Continuing Claims are seen at 1720K vs 1728K prior. The data hasn’t been moving the markets for several months because the market got used to stable labour market conditions. I would expect this to continue unless we get a significant deterioration that increases growth concerns.

This article was written by Giuseppe Dellamotta at investinglive.com.