Beyond the Shutdown: Key Economic Events to Watch This Week

AUD

The Aussie dollar put in a strong performance last week, rallying against all of its G10 counterparts amid a combination of bullish news both domestically and abroad. While the signing of the US-China trade truce is vague and still a long way away from being a full-blown trade agreement, the removal of the tariff risk should at least considerably ease uncertainty for China’s major trading partners in the medium-term. 

Last week’s third quarter GDP report also surprised fairly markedly to the upside. The main inflation rate jumped to 3.2% in Q3, above the 3% estimate and well above the 2.1% print from Q2. The RBA’s trimmed-mean measure, the central bank’s preferred indicator of core inflation, also jumped to 3% (from 2.7%). The data will inevitably act to take pressure off the RBA from cutting interest rates again for at least a little while, with swap markets now seeing only around a 1-in-5 chance of another rate reduction before the end of the year, down from nearly 70% prior to the release of the report. Both developments should, we think, keep AUD well bid this week, and support our bullish call on the currency, particularly against its New Zealand counterpart. 

NZD

The kiwi closed its second consecutive month lower against the US dollar, in what was a relatively quiet week in terms of economic releases. Although the US-China trade deal should offer some relief to Chinese-proxy economies like New Zealand, Fed Chair Powell’s hawkish comments on Wednesday dominated headlines and dictated the NZD’s trajectory. 

This week looks set to be more eventful, with Q3 employment data due on Tuesday. Markets anticipate a modest 0.1% rise in the unemployment rate to 5.3%—a figure that, if confirmed, could cement expectations for a near-fully priced rate cut this month. It remains to be seen whether further easing will be required to spur growth next year, but there’s a chance that this will mark the final cut in the RBNZ’s cycle for some time.

USD

Although the Federal Reserve cut rates as expected last week, the message from Powell was unmistakably hawkish. He made it clear that another cut at the next meeting in December is far from a forgone conclusion. Further hawkish noises came later in the week from Federal regional presidents who will be rotating into a voting position in 2026, highlighting the disconnect between Fed officials and the market regarding the timing and size of any further cuts. As we wait for the Federal government to reopen and resume publishing economic data, that looming conflict between the Trump administration and the Federal Reserve is what will likely come back into focus.

CNY

Optimism surrounding progress in US-China trade negotiations supported both the dollar and the yuan, although the latter outperformed its American peer, continuing its path of timid appreciation (the USD/CNY pair is up 3% YTD). The framework agreement provides for settlements on both sides – the US lowered the so-called fentanyl tariff (a penalty weighing on all Chinese exports to the US) by 10 pp., while China committed to suspending the ban on rare earth exports and increasing purchases of American soybeans, crude oil and gas.

The agreement certainly demonstrates China’s increased global importance compared to Trump’s first term. It also seems like more of a truce than a durable peace settlement, with most of the arrangements only set to be valid for one year. In the coming days (or perhaps weeks), we will be eagerly awaiting confirmation of the assumptions outlined above. As we have already learned this year, nothing should be taken for granted, particularly on the world’s biggest stage.

JPY

The yen remains the ugly duckling in the G10 at present, with investors steering clear of the Japanese currency amid concerns that the new Takaichi administration could exacerbate the country’s already precarious debt situation. Speculation has intensified that Japanese authorities could step in by intervening in the FX market. We don’t think that we are there just yet following recent comments from the finance minister, but we are probably not a million miles away, with the 155-160 level in USD/JPY a possible line in the sand. 

The Bank of Japan is practically guaranteed to hold rates steady at its upcoming meeting on Thursday, and will probably keep its cards close to its chest for now (markets are now favouring a January hike). Takaichi and Trump will also be meeting on Tuesday, with any trade headlines here likely to be heavily scrutinised by market participants.