Key events in developed markets next week

There are several Federal Reserve speakers due to speak next week along with the publication of the minutes to the September FOMC meeting.

All will reinforce the message that there is little prospect of an interest rate hike in the next couple of years with officials and the FOMC “dot plot” diagram suggesting it could be 2024 before we see an interest rate hike. There is a significant output gap that will keep medium-term pressures subdued while high unemployment levels and ongoing economic uncertainty relating to the path of Covid-19 and a potential vaccine are set to keep wage pressures subdued.

Fed officials are likely to suggest that the case for additional fiscal stimulus remains strong and we will be closely watching for any signs of an agreement after encouraging comments from Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi of the prospect of a deal to boost the growth outlook.

As for the data, we have the non-manufacturing ISM index and it will drop marginally, but remain in positive territory, which is similar to the manufacturing report. The trade balance is likely to deteriorate though given the worsening goods figures that have already been published. Nonetheless, the US is still likely to post 30%+ GDP growth in 3Q 2020.