Canada And UK Inflation Reports Draw Attention, Goldman Sachs Sees SP500 To 6,500 In 2025

The euro and the British pound lost ground against the US dollar early on Tuesday morning. Dovish signals coming from European Central Bank (ECB) officials regarding interest rates and Bank of England’s (BoE) head Andrew Bailey answering questions of Treasury Committee members in the UK, later today, seem to have an impact on traders’ appetite.

Economists also expect inflation data from Canada and the UK today, and tomorrow morning respectively, to have a clearer view of the effect of monetary policies implemented by the central banks.

In other news, Goldman Sachs (GS) suggested that the S&P500 could reach 6,500 by the end of 2025, in line with Morgan Stanley’s forecast. GS analysts estimated corporate earnings to grow by 11% and forecast the US GDP to expand by 2.5% during next year.

Canada Consumer Price Index October 2024 Report

Later today, economists will have access to the Canadian inflation reports coming from Statistics Canada and the Bank of Canada. Analysts suggest that Canada’s headline inflation in October may come in at 2.2% on an annualised basis versus September’s 2.3% figure. On a monthly basis, inflation is expected to come in at 0.3%, registering a rise from –0.4% recorded in the previous month.

RBC Economics analysts wrote in a report that “the BoC preferred median and trim core measures (for a better gauge of where inflation is going rather than where it’s been) both likely ticked higher in October on a three-month rolling average. However, they should remain ‘Below 2 ½%’ referenced in the policy statement from the BoC’s October interest rate cut.” Its economists suggest that “given the Canadian economy’s weak momentum, we continue to expect the BoC to cut the overnight rate by an additional 50 basis points in December.”

UK CPI October 2024 Report

On Wednesday morning, the Office for National Statistics (ONS) will release October’s CPI inflation report. Analysts suggest that headline inflation rose by 2.2% on a year-to-year basis, higher than the prior 1.7%. Core CPI on an annualised basis is expected to be at 3.1%, compared to 3.2% recorded in September.

BoE’s Governor Andrew Bailey as well as other central bank officials will appear before the UK Treasury Committee today. Speaking at an event in London, the BoE’s policymaker Megan Greene said that inflation has fallen but the war is not over yet. Regarding interest rates and monetary policy, Greene said that “the risk of cutting too early or too aggressively is a greater risk than going a bit more slowly.”

BoJ Head Says Wage Rises Feed Inflation

The Bank of Japan’s (BoJ) Governor Kazuo Ueda said that the Japanese economy progresses towards sustained wages-driven inflation. Ueda noted that keeping borrowing costs too low wouldn’t be an option, leaving analysts to suggest that the central bank could proceed with another interest rate hike as early as this December.

Ueda suggested that low interest rates and wage rises could feed inflation adding that “the timing for when we'll adjust the degree of our monetary support will depend on the economic, price and financial outlook.” Commenting on the state of Japan’s economy, the BoJ’s head mentioned that “it's true a weak yen pushes up costs and has a big negative impact on consumers. But it's positive for exports and inbound tourism. The overall impact on Japan's economy isn't easy to assess.”

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