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Weekly Economic & Financial Commentary: With Eyes on Washington, the Expansion Continues to Roll Along

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Fundamental analysis of Forex market

Summary

United States: With Eyes on Washington, the Expansion Continues to Roll Along

  • Data released this week showed the production and housing sectors continued to hum, despite ongoing supply constraints, while consumers kept spending, despite some trepidation about the economic outlook.
  • Next week: Trade Balance (Tuesday), ISM Services (Tuesday), Nonfarm Payrolls (Friday)

International: Rate Hikes Across Latin America; Mixed Signals from China’s PMIs

  • With elevated inflation still a concern in Latin America, central banks across the region opted to lift interest rates this week in an effort to control price pressures. While we are not exactly calling for a sudden turn in China’s economic prospects, the non-manufacturing PMI gives us hope that the end of the recent economic slowdown could be near.
  • Next week: Turkey CPI (Monday), RBNZ Rate Decision (Tuesday), Reserve Bank of India Rate Decision (Friday)

Interest Rate Watch: Interest Rates Rise in Wake of FOMC Meeting

  • We look for the yield on the two-year note to rise to 0.90% by the end of next year and to 1.60% by the end of 2023. We also see rates at the longer end of the curve moving higher, albeit not to the same extent as the two-year note.

Credit Market Insights: The iBuyer Phenomenon

  • The United States’ housing market has resiliently rebounded from last year’s sharp, COVID-driven contraction. Recently, home flipping has become increasingly popular among companies known as “iBuyers.” These firms finance their activities with bonds backed by homes they have purchased, but have not yet sold, as collateral.

Topic of the Week: Shutdown Avoided, but Debt Limit Looms Large

  • On Thursday, Congress passed and President Biden signed a continuing resolution (CR) that funds the federal government until Dec. 3. The CR averted a government shutdown that would have begun today if Congress had not acted in time. However, we are not out of the woods yet when it comes to fiscal deadlines in D.C.

Full report here.