This Week Market Movers: Fed, BoE & NFP Report

This week continues to be another big one for investors and traders; financial results for the third quarter are rolling in thick and fast, and a large amount of economic data is also set to be released.

Most notably, results from the Monetary Policy meetings of the Federal Reserve and Bank of England are due, and the Nonfarm payrolls out of the US will show the current state of the labor market.

Forecasts in previous months have suggested that both the Fed and the BoE would continue to implement measures to tighten their monetary policies. However, more recent market trends indicate a growing inclination for both central banks to pause this month.

We'll take a look below at what might affect these market movers, as well as how experts are interpreting the outcomes.

Federal Reserve Meeting - Wednesday 1st November, Decision Statement at 6:00 PM GMT, Press Conference at 6:30 PM GMT.

While a couple of months ago it seemed likely that the Federal Reserve would try to increase rates again by this month, recent data and market forecasters have fallen in favour of pausing the cycle of tightening for the time being again. The Fed Board kept its target range for the federal funds rate at 5.25%-5.5% in September, the same as it did in August.

Fed Chair Powell recently appeared at the Economic Club of New York, where he indicated that the Fed is still proceeding with caution and that decisions to raise, cut or pause interest rates would only be made after the FOMC has considered all available data, the evolving outlook, and the balance of risks.

The central bank seems to be convinced that the present tight policy is successfully reducing inflation and dampening economic activity. To get back on track, however, there may be demands for more tightening of policy if it is seen that growth has been continuously above trend or that labor market tightness is no longer declining.

Moreover, Powell noted that the inflation rate is still too high, and that further easing of labor market conditions and a period of below-trend growth would likely be required to ensure a sustained return to the 2% inflation objective.

One of the Fed's most watched measures of inflation, the Core PCE price index, was released last week. September's growth of 3.7% was the lowest yearly increase in the indicator since May of 2021.

Even while the result was in line with market expectations, it was only a marginal drop from the 3.8% seen in the previous month. The core PCE price index rose 0.3% from the previous month, a more rapid increase than August's 0.1% gain.

GDP data was also made public last week. The early estimate showed that the US economy expanded at an annualized clip of 4.9% in the third quarter of 2023, which was above market forecasts and the 2.1% gain in Q2.

Meanwhile, jobless claims increased by 10,000 to 210,000 in the week ending October 21, which was more than the 208,000 predicted by economists.

Bank of England Meeting - Thursday 2nd November, Decision Statement at 12:00 PM GMT, Meeting Minutes at 12:00 PM GMT.

There are still significant differences between the BoE's situation and the Fed's. The country's economy is growing more slowly while inflation is at record highs and the job market shows only small indications of weakening while remaining resilient.

The annual rate of change in core consumer prices in September was 6.1%, down from 6.2% in August but still over the 3% target range.

Furthermore, there are signs that the expansion of the British economy is slowing. Retail sales in September were less than anticipated, and analysts predict that the quarterly GDP number will show a modest decrease compared to the Bank of England's projection of 0.1% increase.

The UK's gross domestic product grew by 0.6% year on year in the second quarter of 2023, which was above the original estimate of 0.4% and after an upwardly revised 0.5% gain in the prior period.

In keeping with market expectations, the Bank is not expected to make any changes this week, as predicted by 61 of 73 economists polled by Reuters between October 18th and 23rd.

Nonfarm Payrolls - Friday 3rd November, October Report released at 12:30 PM GMT.

Last month, the US labor force created 336,000 jobs, which was far more than predicted, as the world's biggest economy remained robust in the face of rising interest rates.

The significant increase in hiring saw nonfarm payrolls expand by almost twice the pace predicted by experts in September. This was the greatest employment increase in eight months and far more than the 70K-100K required each month to keep up with the rise in the working-age population. July and August readings were also revised upward, with 236,000 and 227,000 jobs gained, respectively.

Expectations are for a dip back down to around 180,000 new jobs created for October. The Federal Reserve will be watching closely due to this figure's significance as a leading indication of consumer spending, which constitutes a substantial portion of the total economic activity and heavily influences inflation.