It’s going to be a busy week ahead as it’s usually the case at the start of a new month. The highlights include the ISM Manufacturing PMI, the Swiss CPI and the US jobs data.

US ISM Manufacturing PMI (Mon):

The US ISM Manufacturing PMI is expected at 47.5 vs. 46.5 prior. The S&P Global Manufacturing PMI came in as expected but the details showed once again an improvement and a much better future outlook. In fact, the manufacturing sector optimism hit a 31-month high amid improved sentiment due to reduced political uncertainty following the US Presidential Election. Moreover, expectations of lower interest rates, lower inflation, and better economic conditions contributed to positive outlooks, as well as a more business-friendly incoming administration.

Switzerland CPI (Tue):

The Switzerland CPI Y/Y is expected at 0.8% vs. 0.6% prior. Inflation in Switzerland has been falling pretty fast but despite that, the SNB kept on cutting rates by just 25 bps. The Swiss Franc is still relatively strong, and it’s been hurting Swiss exporters. The market is pricing a 72% chance of another 25 bps cut in December with the remaining probability for a 50 bps move. Recently, SNB’s Chairman Schlegel said that they might reintroduce negative interest rates if necessary. Schlegel took charge in October, and it sounds like he’s not afraid of taking more aggressive actions be it larger rate cuts or strong interventions.

JOLTS (Tue):

The US Job Openings are expected at 7.480M vs. 7.443M prior. The last report surprised to the downside with the quits rate ticking slightly lower and the hiring and layoffs rates remaining relatively stable. It’s a labour market where at the moment it’s hard to find a job but there’s also low risk of losing one. There’s a good chance that things will improve next year though and there have been some positive signs already.

US ISM Services PMI (Wed):

The US ISM Services PMI is expected at 55.6 vs. 56.0 prior. This survey hasn't been giving any clear signal in the past couple of years as it’s just been ranging since 2022. The last report though jumped to a new cycle high, which highlights the pick up in economic activity with the expected rate cuts and now a more business-friendly incoming administration, with expectations of looser regulations, tax cuts and so on.

Japanese Average Cash Earnings (Fri):

The Japanese Average Cash Earnings Y/Y is expected at 2.6% vs. 2.8% prior. The Tokyo CPI recently accelerated giving the JPY a boost as the market sees good chances of a rate hike in December. The commentary from BoJ officials has been mixed but leaning into a slightly hawkish stance. The probability for a 25 bps hike in December stand at 56% but an upside surprise in the wage data could see those probabilities tick higher.

Canada Job Report (Fri): 

The Canadian Labour Market report is expected to show 27.5K jobs added in November vs. 14.5K in October and the Unemployment Rate to tick higher to 6.6% vs. 6.5% prior. The BoC is now focused on growth as they met their inflation target. Following Friday’s Canadian GDP report, the market increased the probabilities for a 50 bps cut in December to 52%. Better than expected jobs data will likely see the 25 bps cut getting back in favour.

US Non Farm Payroll (Fri)

The US NFP report is expected to show 195K jobs added in November vs. 12K in October and the Unemployment Rate to tick higher to 4.2% vs. 4.1% prior. The Average Hourly Earnings Y/Y are seen at 3.9% vs. 4.0% prior, while the M/M measure is seen at 0.3% vs. 0.4% prior.

The last report was negatively impacted by strike activity and hurricanes, so the market just ignored it, especially since the focus was on the US Presidential Election. The labor market data throughout November has been positive, so the expectations going into this NFP report are skewed to the upside.

As previously mentioned, we don’t see the market repricing the rate cuts expectations further based on labor market data. The main event this month will be the US CPI on the 11th of December. The Fed is going to cut by 25 bps anyway but revise the dot plot to show just two rate cuts in 2025 (in line with the market’s pricing) and communicate a pause to gather more information.

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