Global data exceeding forecasts; US and Japan lead but others lag

The global relative performance index is firm at 15 in no small way due to further upside surprises in both the US and Japan. Both mask, however, sub-par developments in the Eurozone and the UK.

The Eurozone’s RPI is at minus 12 and slides to minus 22 when excluding prices (RPI-P). Both strengthen the hand of the ECB’s doves. Inflation and GDP data in the coming week will be key inputs to what happens to rates at the next and last ECB meeting of the year in December.

The underperformance of UK economic activity is similarly becoming more marked as the RPI dipped to minus 18 and the RPI-P to minus 33. Even so, while market expectations are for the BoE to hold Bank Rate steady at 5.25 percent on Thursday, inflation pressures probably remain high enough for at least some members on the Monetary Policy Committee to repeat their calls for another tightening.

In Japan, speculation is rife about when the BoJ will further adjust its yield curve control policy. At 41 and 48, both the RPI and RPI-P show that economic activity in general (and now inflation in particular) is running well ahead of market expectations. Consequently, even without any move from the central bank on Tuesday, investors will be looking for hints that a shift might not be too far off.

For the US, the RPI is at a strong 35 while the RPI-P at 37 shows that the strength is balanced. Though this will give policy hawks at the week’s Federal Reserve meeting plenty of debating points on upside risks to the inflation outlook, expectations are firm that policy rates, given the prospective drag from high market rates, will remain unchanged.