Markets Look to U.S. Inflation Data, Fed Chair Powell Speech After Election Fireworks

Headlines about staffing and steering the new U.S. administration will stoke fiscal policy speculation

• U.S. inflation data and Fed Chair Powell speech are in focus for rates and the dollar.
• The British pound may fall if soft U.K. GDP data fuels dovish BOE speculation.
• China may disappoint markets with weak retail sales and low industrial production figures.

The U.S. presidential election loomed large last week. Wall Street roared as Republican Donald Trump scored a decisive victory over Democratic rival Kamala Harris. The bellwether S&P 500 rose 4.6% while the tech-tilted Nasdaq 100 added 5.4% on the week as the passing of critical event risk drained uncertainty from markets.

A flurry of headlines about staffing and steering the first steps of the new U.S. administration will now stoke fiscal policy speculation. In the meantime, the monetary side is in flux as traders weigh key data updates and Federal Reserve Chair Jerome Powell delivers a speech about the outlook for the U.S. economy.

U.S. inflation report, Fed Chair Powell speech in the spotlight

October’s consumer price index (CPI) figures are expected to show that core inflation held steady at 3.3% year-on-year. This would amount to the fourth consecutive month without disinflation. Retail sales data is projected to show receipts rose 0.3% last month, a mild cooling after the 0.4% increase in September.

Analytics from Citigroup suggest U.S. data outcomes have increasingly outperformed relative to analysts’ models in recent weeks. More of the same this week may come coupled with another forceful performance from Powell. He insisted that the central bank is not on dovish autopilot at the press conference after last week’s policy meeting.

Treasury bonds may fall in this scenario while yields and the U.S. dollar rise as traders revise down Fed interest rate cut expectations. The markets put the probability of another 25-basis-point (bps) reduction in December at 48%. Two cuts are priced in for 2025, along with a modest 36% chance of a third one.

Economic data from China may disappoint again

Meanwhile, China will report on retail sales and industrial production trends. Last week, purchasing managers’ index (PMI) data as well as trade and inflation readings pointed to soggy domestic demand alongside a jump in exports as foreign buyers—especially in the U.S.—attempt to front-run the risk of higher tariffs promised by President-elect Trump.

If this week’s results point in a similar direction, hopes for a lasting rebound in the world’s second-largest economy may evaporate again. That threatens to weigh on markets linked to China’s economic fortunes, including copper and the Australian dollar.

The British pound may fall if U.K. GDP data misses the mark

In the U.K., gross domestic product (GDP) data is due to show a firming recovery. Output is expected to have grown by 1% in the third quarter, topping the 0.7% increase recorded in the three months to June. Unlike the U.S., economic data across the Atlantic has increasingly soured recently relative to forecasts, according to Citigroup.

If the GDP print underwhelms, dovish speculation surrounding the Bank of England (BOE) may intensify, hurting the British Pound. For now, the central bank is expected to forego another interest rate cut in December. Two 25bps down moves are priced in for 2025, along with a 50% probability of a third one.

Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

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