The financial markets are primed for major fluctuations as highly important economic data is scheduled to be released this week.
Employment
Tuesday, GDP
Wednesday
First up to bid will be the jobs report on Tuesday, with the flash estimate of Q3 GDP due out Wednesday. This series of reports will play a big role in determining future interest rate hikes. They are used by the Monetary Policy Committee (MPC) of the Bank of England to inform its decisions.
The MPC takes a very technical, data-focused approach to its monetary policy. This indicates that future economic indicators will play a huge role in their decision-making. Recent remarks from committee members reveal an unmistakable rift regarding future interest rates. Some members are very committed to a hawkish result and others to a very dovish one. As it stands, it seems like Governor Andrew Bailey holds the casting vote, which complicates the picture further still.
At the moment, futures markets are pricing in about a 70% chance of at least one rate cut by December. Though this could change quite a bit depending on how things play out with the employment and GDP growth data. A big positive surprise in either report would likely lead to a reassessment of the hoped-for rate cut. This makes the importance of this week’s release all the more incredible.
The employment report will be of historic significance. It promises to be a fascinating and indispensable window onto the true state of the UK’s labour market health. To a significant extent, it will be job growth and wage trends that analysts can’t help but focus on, these being the key drivers and predictors of economic health. Similarly, the flash GDP release will offer a snapshot of economic growth, which is integral to understanding overall economic performance.
The next budget release, due on the 26th of November, will provide more context to this emerging economic picture. The direction this budget sets for overall fiscal policy will in turn shape the context and direction of any necessary monetary policy decisions.