With yet another big week ahead for the markets, Thomas Watts, Senior Investment Analyst, abrdn MPS, comments on the economic data releases this week;
“After what seems to have been years of electioneering between the two main parties, the US should have selected a new president by the end of the week, with Americans heading to the polls on Tuesday. Whilst market moves over the coming days should be dictated by who inherits the keys to the White House, there is a multitude of economic data that could set the scene for the longer period, especially as the Bank of England (BoE) and the Federal Reserve make rate announcements with the former cutting by a further 0.25%.
From the budget announcement from no.11 Downing Street last week, across London to Threadneedle Street this week, the important domestic news keeps flowing as our very own BoE gears up to cut borrowing costs to below 5%. Speaking at a meeting of the Institute of International Finance last week, BoE Governor, Andrew Bailey commented that “disinflation” had actually taken place “faster than we expected it to”, but added that the economy still needs to see a further drop in services inflation, despite recent progress.
Markets are expecting a 0.25% rate cut during the coming week, taking the base rate down to 4.75%. Whilst some investors and economists then expect another cut to follow shortly afterwards in December, a mildly inflationary Budget from the government has muddied the water slightly. With a move being largely priced in by markets, it will be the bank’s forward guidance that could really move markets, as they give their outlook for the economy and future rate policy.
Towards the end of the week, we head to Wall Street where the Federal Reserve will give their views on the economy. Although also expected to move on interest rates during this upcoming meeting, possibly cutting by 0.25%, much like here in the UK, the bank’s future guidance will provide the main talking points for economists going forward.
Whilst the fallout from the US elections could quite literally trump whatever goes on in the markets, the mixture of central bankers and politics could well cause fireworks for investors, aptly in a week that contains Bonfire Night.”
