Welcome to our regular Monday summary of the most important economic events that took place at the turn of the month.
Earlier in the week, we focused on the output of US Federal Open Market Committee (FOMC) member Jerome Powell (Fed Chairman), who once again prepared his speech on inflation. Powell conveyed that the factors driving inflation higher are likely to persist through 2022. Inflation is well above target (2 %), pushed higher by pandemic-related supply and demand imbalances. Although the U.S. economy continues to strengthen, the new variant of the virus poses a problem for employment, feeding heightened uncertainty about inflation... Powell acknowledged that it is time to drop the term "transitory" for inflation. The risk of higher inflation is a risk to the return of full employment. Late in the week, data was released regarding US Nonfarm payrolls, which measures the change in the number of people employed, compared to last month, excluding the agricultural sector. Higher readings imply bullish sentiment, which we did not see as the actual readings came in much worse (210k vs. the previous 546k).
On Tuesday, we were awaiting data on the change in the Eurozone Consumer Price Index (CPI), which measures the change in prices of goods and services from the consumer's perspective. The actual reading came in slightly more positive (4.9 %) compared to the previous reading (4.1 %). Eurozone inflation surged to its highest level in 30 years, while the core reading is the highest on record in November, as rising energy prices are the main driver of price increases.
The same day (Tuesday) also saw the release of GDP data from Canada.
The month-on-month GDP result was slightly worse than the previous month (0.1 % actual vs. 0.6 % previous),
At the end of the week we were still interested in the change in the number of people employed. Job creation is an important indicator of consumer spending. In this respect, we were surprised when the actual result came out more positive compared to the previous month (153.7k vs. 31.2k). The unemployment rate is the lowest since February 2020 and the total number of jobs is now 186k above pre-pandemic levels.
What's in store for the current trading week?
This week, we will turn our attention to the interest rate decisions coming from Australia and Canada on Tuesday and Wednesday. We will expect a large dose of volatility in the AUD and CAD currency pairs on these days. Later in the week we will be waiting for data from the US regarding the change in GDP and the Consumer Price Index (CPI).