Week in Focus 19-23rd October 2026: Highlights include UK, Japan and Canada inflation, China Activity Data and Global Flash PMIs

MON: Japan and the US reportedly plan large-scale drills (19-29 Oct), Chinese Activity Data (Q3/Sep), Canadian CPI (Sep) TUE: Chinese LPR (Oct), German PPI (Sep), UK Jobs Report (Aug), EZ/German ZEW Survey (Oct), US Housing Starts/Building Permits (Sep) WED: Japanese Balance of Trade (Sep), UK Inflation (Sep) THU: SNB Minutes (Sep), CBRT Policy Announcement (Oct), BoK Policy Announcement (Oct), Canadian PPI (Sep), Australian Flash PMI (Oct) FRI: CBR Policy Announcement (Oct), Moody's Credit Review on France, Japanese CPI (Sep), Global Flash PMIs (Oct), UK Retail Sales (Sep), Canadian Retail Sales (Aug) WEEK AHEAD CHINESE ACTIVITY DATA (MON): Chinese Q3 GDP is expected to grow 4.4% Y/Y (prev. 4.3%) and 1.1% Q/Q (prev. 0.9%), while September Industrial Production is forecast to rise 5.3-5.5% Y/Y (prev. 5.2%), Retail Sales by 0.7% (prev. 0.4%) and Fixed Asset Investment to decline 7.5% (prev. -7.2%). The data is expected to highlight the continued divergence between resilient industrial and export activity and weak domestic demand, with consumption and investment still weighed down by the property downturn and a soft labour market. Weaker-than-expected readings would, as always, increase pressure on Beijing to step up fiscal support as it seeks to meet its 4.5-5.0% growth target. CANADIAN CPI (MON): The Canadian inflation report will be released on Monday. The latest jobs report, which showed another decline in employment and an uptick in the unemployment rate, has dampened expectations for a rate hike in 2026, raising the bar for inflation readings to prompt the BoC to resume tightening. Minutes from the BoC’s September meeting showed that the Governing Council expected near-term inflation to remain elevated, with members seeing an increased risk of inflation spreading to non-energy goods and services. CHINESE LPR (TUE): The PBoC is expected to maintain its 1yr LPR at 3.00% and 5yr LPR at 3.50%, marking a 17th consecutive month of unchanged rates. The 7-day reverse repo rate has also remained unchanged, while ample banking liquidity and weak underlying credit demand have reduced the need for further near-term easing. Policymakers also appear willing to allow more time for recent fiscal support to feed through to the economy. However, Monday's activity data will be a key consideration, with a significant growth disappointment likely to raise expectations for further policy support later in Q4. UK JOBS REPORT (TUE): July’s series was slightly mixed overall but on balance had a very slight dovish tilt, coming from the larger than expected claimant count figure and another decline in payrolls. The latest REC survey pointed to growth in recruitment activity, and further payroll pressures. A point of interest from the series will be signs that firms are pausing hiring activity ahead of the October budget. Overall, the series will not significantly change the calculus for the BoE, which will be more focused on the inflation series the day after. UK INFLATION (WED): August’s series was as expected, ticking up to 3.1% for the Y/Y while services remained at 3.4%. Overall, the series did not shift the dial ahead of the September BoE, while the September series due this month will once again be scoured for any signs of second round effects. The headline is expected to increase to 3.4%, above the BoE’s 3.0% forecast, with fuel, airfares and an unwinding of seasonal activity pushing inflation higher. For the BoE, any signs of second round effects will turn the dial further in favour of a November hike. A cooler print may provide some relief, but as the economy remains relatively robust overall and inflation remains high and is likely to climb into the winter, any such dovish implication would be short-lived in nature. CBRT POLICY ANNOUNCEMENT (THU): The CBRT heads into its October meeting with little urgency to raise the policy rate from 37%, as inflation continues to ease. The latest CPI data showed price growth slowing to 29.7% from 31.5% in August, with the monthly reading also coming in below the median forecast. This supports the CBRT's view that "despite monthly fluctuations, recent inflation figures and leading indicators suggest that the underlying trend of inflation is decelerating." Beyond any changes to policy guidance, investors will be watching for commentary on recent liquidity conditions and the depreciating TRY. Bloomberg reported that the CBRT Governor told investors that Turkey was allowing the currency to weaken more rapidly to prevent a sharper depreciation over the longer term. The Governor argued that the pass-through effect of TRY depreciation on inflation had weakened amid softer economic activity. BOK POLICY ANNOUNCEMENT (THU): The BoK is set to hold its latest policy meeting next week and is widely expected to keep its base rate unchanged at 3.00% following back-to-back rate hikes. As a reminder, the BoK raised rates by 25bps at its last meeting in August, following a hike in July, although the decision was not unanimous as Board Member Hwang dissented. The central bank stated that inflation is projected to remain above target for a considerable time and that it would assess conditions to determine the pace and timing of further tightening. Furthermore, board members' projections showed a median expectation of another 25bps hike within six months, with slightly more projections for 50bps of hikes (6 out of 21) than for unchanged rates (5 out of 21) over the same period. Nonetheless, an immediate hike appears unlikely given the previous rate increases and comments from BoK Governor Shin suggesting a lack of urgency. Shin recently noted that the central bank had bought itself time by raising rates in August ahead of the Fed's September hike. Furthermore, he said the timing and pace of any further rate increases would depend on inflation, economic growth trends and financial stability conditions. He also acknowledged that monetary tightening places a heavier burden on vulnerable households, with lower-income borrowers hit harder by rate hikes. MOODY'S CREDIT REVIEW ON FRANCE (FRI): Moody's currently rates France Aa3 with a Negative outlook, citing ongoing political uncertainty ahead of the presidential election and an inability to improve the fiscal position. The agency noted that a future upgrade was "highly unlikely", although the outlook could return to "stable" should legislative difficulties prove temporary. This has not been the case, as evidenced by the latest budget developments, with the OAT-Bund spread widening to around 151bps, its highest since 2012. In brief, PM Lecornu unveiled a draft budget that was widely seen as failing to address France's fiscal challenges. Moreover, its growth assumptions were regarded as overly optimistic, leading some to question its viability. One point of interest was RN leader Marine Le Pen's presentation of an alternative budget, which appeared to alleviate some fiscal concerns but was not seen as materially improving the debt outlook. Instead, markets appeared to welcome her seemingly more market-friendly stance, including indications of openness to a wealth tax. Fitch also published its assessment of the latest budget developments, suggesting the process could be smoother than in previous years but warning that a failure to make substantial progress on deficit reduction could prompt the agency to revise its outlook to Negative. "A further substantial rise in government debt could then lead to a downgrade." Moody's faces two choices: 1) maintain France's Negative outlook, given the lack of material improvement in the fiscal and political situation since its last review, or 2) downgrade France, potentially seeking to get ahead of the 2027 presidential election. JAPANESE CPI (FRI): Japanese inflation is expected to accelerate sharply in September, with headline CPI forecast at 2.8-3.0% Y/Y (prev. 1.9%) and Core CPI also expected to rise significantly (prev. 1.7%). The increase is expected to reflect the fading impact of government energy subsidies alongside elevated import and wholesale costs, with Tokyo Core CPI recently rising to 2.7%. The release will be the final major inflation reading ahead of the October BoJ meeting, with another strong print likely to reinforce expectations for further tightening later this year. UK FLASH PMI (FRI): September’s series was robust but, as with retail sales, was characterised by subdued demand, increasing prices, weaker business activity and pre-budget uncertainty. The main bright spot was technology. For October’s flash reading, the data will likely once again be characterised by the above themes. EZ FLASH PMI (FRI): October's PMI report will provide an early indication of whether the Eurozone economy can sustain the resilience seen throughout 2026. Growth has been supported by both the services and manufacturing sectors, although the ongoing conflict in the Middle East and elevated energy prices pose substantial risks of a near-term downturn. Manufacturing PMI is expected to print within a 52.5-53.2 range (prev. 52.9), while services PMI is forecast between 52.5-53.3 (prev. 53). As a reminder, September's PMI release highlighted that "a renewed upturn in prices" signals inflation running at 4% (vs the ECB's 2% target). Combined with the acceleration in growth indicated by the PMI, the data "will spur further speculation of more aggressive monetary policy tightening." UK RETAIL SALES (FRI): The BRC monitor for September showed a 1.3% Y/Y increase, led by health and beauty. Generally, the period was characterised as one of waiting for the budget and any tax rises that may emerge, further hitting a consumer who is already feeling the pressure of a cost-of-living crisis amid persistent and rising energy prices. WEEK IN REVIEW RBA MINUTES (TUE): The RBA Minutes from the September meeting reaffirmed the central bank's hawkish tone and kept the door open for further rate hikes, but offered few surprises and were ultimately a non-event. The Minutes stated that the Board was concerned excess demand in the economy was greater than previously assumed and saw an increased risk of persistently elevated inflation, while reiterating that it would raise rates further if needed. All Board members agreed that a 25bps rate hike was necessary, although the Board briefly considered the case for keeping rates unchanged, including the decline in house prices. Furthermore, the Board discussed upside inflation risks and factors that could sustain higher inflation, noting that some upside risks had already emerged or intensified since August. The Board also highlighted the need to adjust rates in a timely manner to keep inflation expectations anchored. CHINESE CPI / PPI/ TRADE DATA REVIEW: Chinese CPI rose 0.9% Y/Y in September (exp. 1.0%, prev. 0.8%), while PPI accelerated to 5.0% (exp. 4.4%, prev. 3.8%), highlighting stronger upstream cost pressures but limited pass-through to consumers amid subdued domestic demand. Meanwhile, trade data was significantly stronger than expected, with exports surging 36.3% Y/Y (exp. 25.5%, prev. 25.0%) and imports rising 31.0% (exp. 24.5%, prev. 28.2%), pushing the trade surplus to USD 133.53bln (exp. USD 116.80bln, prev. USD 119.09bln). Credit data was also firmer than expected, with New Loans at CNY 1.08trln (exp. CNY 1.025trln) and Total Social Financing at CNY 3.55trln (exp. CNY 3.27trln). US CPI (WED): Overall, the September CPI report was hotter than expected. Core CPI rose 0.335% M/M, above the expected 0.2% and prior 0.290%, while the annual rate accelerated to 2.6% Y/Y (exp. 2.5%, prev. 2.4%). Headline CPI rose 0.649% M/M, accelerating from the prior 0.396% and broadly in line with the 0.6% forecast. The headline increase was primarily driven by a 9.1% rise in gasoline prices, which accounted for over half of the monthly increase in the all-items index. Within the core components, increases were seen in recreation, used cars and trucks, education, airline fares, medical care and apparel, while communication was among the few major categories to decline. The hotter-than-expected core print prompted markets to reassess expectations for the Fed's October meeting, with the probability of a 25bps hike rising to around 50% from 20% before the release. Expectations for an October hike had previously diminished following softer-than-expected August PCE, weak September NFP data and recent commentary from Fed officials suggesting little urgency to tighten further. Attention now turns to Thursday's PPI report for further insight into underlying inflation pressures, ahead of Fed Chair Warsh's appearance at the IMF on Friday morning, where participants will look for his assessment of the data and any implications for the upcoming rate decision. Following the release, Pantheon Macroeconomics said the CPI report appears consistent with a 0.33% M/M increase in the core PCE deflator, which would lift the annual rate to 3.1% from 3.0% in August. However, Pantheon doubts the report is sufficiently strong to prompt an October hike given recent signalling from Fed officials, although its base case remains for a December hike amid the broad-based inflation momentum evident in the CPI data. US PPI (THU): US producer prices rose sharply in September, with headline PPI increasing 1.3% M/M (exp. 0.5%, prev. 0.5%), marking the largest monthly increase since March 2022. The annual rate accelerated to 6.3% (exp. 5.3%, prev. 5.6%), its highest since December 2022. Core PPI rose 0.7% M/M (exp. 0.3%, prev. 0.2%), while the annual rate increased to 5.0% (exp. 4.4%, prev. 4.8%). Under the hood, goods prices surged 2.6%, the largest increase since the series began in 2009, driven predominantly by a 10.8% jump in energy prices, with gasoline prices rising 20.3% and accounting for half of the increase in goods prices. Food prices also rose 1.2%, while services prices increased 0.8%, driven partly by a 1.4% rise in trade services margins and a 3.4% increase in transportation and warehousing costs. Oxford Economics wrote that they expect PCE to print 0.5% M/M and 3.6% Y/Y, rising from 0.3% and 3.4%, respectively. OxEco continue to forecast Fed rate hikes in October and December. AUSTRALIAN JOBS REVIEW: Australian employment unexpectedly fell 39.3k in September (exp. +19.6k, prev. +29.3k), while the Unemployment Rate rose to 4.7% (exp. 4.6%, prev. 4.7%) and the Participation Rate declined to 66.8% (exp. 67.0%, prev. 67.0%). The decline was entirely driven by part-time employment, which fell 73.7k, while full-time employment rose 34.4k. Overall, the report pointed to further cooling in the labour market and weakened the case for another near-term RBA rate hike, although the increase in full-time employment partially offset the headline weakness. UK GDP (THU): UK GDP rose 0.1% M/M in August, beating expectations for a 0.1% contraction, although growth slowed from the previous month's 0.4%. This lifted the three-month average to 0.7% (prev. 0.5%), while Y/Y growth accelerated to 2.1% (prev. 1.8%). The economy has remained relatively resilient over the past year, although the release is unlikely to materially influence the BoE's immediate policy outlook, given its near-term focus on inflation and second-round effects. Nevertheless, the data could reinforce the case for further tightening this year, with markets assigning around a 77% probability to a 25bps hike in November and fully pricing in such a move by December. Monetary policy aside, Chancellor Healey would likely welcome August's modest growth ahead of the highly anticipated Autumn Budget on 28th October, given its implications for preserving fiscal headroom. US RETAIL SALES (THU): Retail Sales rose 0.8% M/M in September, above the expected 0.3%, though easing from the August 1.3% figure. Sales at gasoline stations largely contributed to the headline beat, rising 6.4% amid elevated energy prices. Ex-gas/autos rose 0.2%, notably easing from the 1.1% prior; meanwhile, the core component, Control Group, rose 0.1%, shy of the expected 0.3% (prev. 1.2%). Oxford Economics wrote that consumer spending is still on track for a 3.3% annualised gain in Q3, but “we expect spending to lose momentum heading into the key holiday shopping season as the drag from higher prices weighs more heavily on consumers”.