Markets
US eco data are at it again. Weekly jobless claims picked up slightly more than expected (from 218k to 231k) to the highest level since mid-August. Continuing claims, the number of people who have already filed an initial claim and are still filing for unemployment benefits, rose to 1865k. That’s slightly above the early April top (1861k) and the highest level since November 2021. October import and export prices completed this week’s hattrick of positive inflation surprises following CPI on Tuesday and PPI yesterday. Import prices fell by 0.8% M/M (-2% Y/Y) while export prices were 1.1% lower compared with September (-4.9% Y/Y). Markets anticipated a more gentle decline. The headline Philly Fed Business Outlook improved slightly more than hoped (-5.9 from -9), but underlying details showed deteriorations in new orders (1.3 from 4.4), employment (0.8 from 4), shipments (-17.9 from 10.8) and the general outlook six months from now (-2.1 from 9.2). Prices paid meanwhile confirmed the disinflationary trend (14.8 from 23.1) while prices received remain more sticky (14.8 from 14.6). The US Note future rallied back to this week’s earlier high, but failed for now to really test these tops. US yields obviously show a similar trading pattern, attempting to extend this week’s correction lower. Daily changes vary between -7.8 bps at the frond end and -5.7 bps at the very long end. German Bund yields again shadow US ones lower, but with a marginal outperformance of the very long end (-5.4 bps for 30-yr vs -4 bps for 2yr). The trade weighted dollar equally tries to keep it together just above this week’s sell-off lows (104.33 vs 104) with EUR/USD currently changing hands at 1.0869, up from an open at 1.0848 and compared to this week’s top at 1.0887. European stock markets are mixed, ending a three-day rally with key US gauges marginally weaker at the start of today’s US session. EUR/GBP set a new (intraday) cycle top 0.8766 (highest since May), ignoring central bank talk. Bank of England policy maker Greene suggested that monetary policy needs to be restrictive for longer as the notion that the long run neutral rate might be a bit higher as well as the natural rate of unemployment isn’t something everyone’s grappling with yet. Greene is one of the hawks on the board, unsuccessfully voting for higher rates at the previous meeting. Her comments contrast with analyst talk today that the BoE could pull the trigger on policy rates ahead of the Fed and the ECB.
News & Views
Hungary’s central bank (MNB) vice-governor Virag today said the monetary institution will likely continue to cut interest rates at an unchanged pace of 75 bps despite inflation declining more than hoped-for. He said that it’s realistic for rates to go below 11% by year’s end and below 10% in February. Real interest rates will remain positive in the period ahead, he added, with the central bank (and KBC Economics) expecting inflation to ease to 7-8% by December. The MNB started lowering the base rate end October. Doing so surprised markets who were at the time expecting a 50 bps cut. It underpinned the decision with inflation falling faster than expected. With October CPI two weeks later again dropping more than forecasted (sub 10%), speculation for more aggressive rate cuts to the tune of 100 bps promptly rose. Virag’s comments come after similar ones from Zsolt Kuti, a close advisor to the Hungarian rate-setting committee. He argued against cutting rates too hastily yesterday. Their (scripted?) appearance leaves little traces on the Hungarian forint, which is trading unchanged around a four-month high of EUR/HUF 376.3.
Adam Bodnar, the man widely tipped to be Poland’s next Justice minister, in a Reuters scoop said he’ll let the European Public Prosecutor’s Office (EPPO) know that it wishes to join in the first weeks after a new, pro EU opposition-led government is formed. The EPPO is an independent public prosecution office of the EU which deals with cases affecting the bloc’s financial interests. 22 out of the 27 member states have joined but Poland under the outgoing PiS government hasn’t (yet). For Bodnar, joining EPPO is a sign of good faith to “show we are coming back to the rule of law”, a critical condition to unlock billions of EU funds that are currently held back. In other news, Polish core inflation came in bang in line with expectations. Monthly dynamics accelerated from -0.1% to +0.6% in October, bringing the y/y figure to 8%. The (PiS-minded) central bank recently took a hawkish turn after the October elections, with risks of the policy rate (5.75%) being kept stable at least through March 2024.The zloty vastly outperforms regional peers today. EUR/PLN drops to 4.37. This is the strongest PLN level since early 2020.
 to the highest level since mid-August. Continuing claims, the number of people who have already filed an initial claim and are still filing for unemployment benefits, rose to 1865k.){kind=link}