The Week Ahead: Bank of England to cut, BoJ to hike and delayed November US jobs report due

It’s the final week before traders start to wind down for the Christmas break and there is plenty in store to drive price action after Wall Street notched fresh all-time highs in the wake of the Federal Reserve cutting rates for a third straight meeting. In the coming days the Bank of England is widely expected to cut rates, while the European Central Bank seems content to stand pat. The delayed November jobs report from the US is due out, driving expectations for what the next likely move by the Fed might be. Earnings come from FedEx, Nike and Micron.

Here’s the key events to watch this week.

Monday, 15December

We’re out the gates with a raft of Chinese economic figures – industrial production, fixed asset investment and retail sales data among the key things to watch. The UK’s Rightmove house price index is also due early. Canada’s latest inflation data is due later on alongside the US Empire State manufacturing index.

Tuesday, 16December

The delayed November US jobs report is due today. Softening labour market conditions have been central to the Fed’s decision to cut rates for a third straight meeting. The question is whether the official nonfarm payrolls report for November backs up the thesis. 

Layoff announcements this year top 1.1 million, the most since 2020 when the pandemic hit, according to the Challenger jobs report series, which has taken more significance due to the patchy official labour market data in the wake of the US government shutdown. The firm said layoff plans hit 71,321 in November, down from the huge (22yr high for the month) cuts announced in October...the 1.17mn total is 54% higher than the same 11-month period a year ago and job cuts in November above 70,000 have happened only twice since 2008: in 2022 and in 2008. ADP also reported a 32k drop in payrolls. But weekly unemployment claims dropped to a three-year low.

Elsewhere, UK jobs data is in focus coming ahead of the Bank of England on Thursday, but a cut seems assured. We’re also due some flash PMI surveys for the Eurozone, UK and US, offering a year-end snapshot of the health of the global economy. US retail sales numbers will also be watched to see how strong the US consumer feels right now amid what’s being called a K-shaped economy.

Wednesday, 17December

UK inflation data is the last possible thing in the way of a rate cut by the BoE this week. Despite coming down from double-digits the headline CPI number remains stubbornly high and is likely to remain well above the Bank’s 2% target. Some Euro area inflation numbers are also due up ahead of tomorrow’s European Central Bank meeting. Earnings are due from Micron – the stock has been rallying as investors anticipate a beat, with UBS and Deutsche Bank both raising their price targets on the stock ahead of the event.

Thursday,18 December

The Bank of England is, as detailed above, widely anticipated to cut interest rates. Markets will be assessing the prospect of how quickly and far they plan to go with further rate cuts next year. The ECB meanwhile seems happy to leave rates unchanged, with markets increasingly positioned for this easing cycle to be well and truly over and the next adjustment likely to be a hike.

Earnings are due from FedEx and Nike – both of whom are interesting bellwethers for the US and global economy.

Friday, 19 December

The Bank of Japan is expected to raise interest rates at its last policy meeting of the year, and signal further increases to come as the central bank battles a persistently weak yen. Economists polled by Bloomberg said BoJ would look to phase in additional hikes every six months as it looks to get closer to the so-called neutral rate that is neither accommodative nor restrictive, but soaring JGB yields means the central bank might be reluctant to move much further.