It will be a week packed with inflation figures from major economies, including the United States, China and Germany among many others.

But the spotlight shines on Africa’s 4th largest economy – Nigeria.

Inflationary pressures have been cooling in recent months but the latest figure for October is expected to have jumped 33.4%, from 32.7% in September.

This may be the result of fuel hikes and floods in the northern part of the country affecting the harvest season.

The CBN has been on a mission to support the Naira and attract investments using aggressive monetary policy.

Interest rates were raised by 50 basis points to 27.25% in September – marking its fifth consecutive hike in 2024. Should the Naira show signs of stabilizing, annual inflation could peak in the final quarter of this year.

Dollar set for volatile week?

Outside of Nigeria, our attention falls on the US Dollar Index (DXY) which could be rattled by key US data and Fed speeches including Jerome Powell.

Besides, it would be a crime to overlook the index after its aggressively bullish reaction to Trump’s US election win. Prices jumped almost 2% last week Wednesday on the “Trump trade” before giving back post-election gains as the Pound and Yen gained.

Note: The DXY tracks the dollar’s performance against a basket of six different G10 currencies, including the Euro, British Pound, Japanese Yen, and Canadian dollar.

With all the above said, the DXY could see more price swings.

*US October CPI report

The October US Consumer Price Index (CPI) report to be published on Wednesday 13^th November could impact Fed cut expectations around lower US interest rates in December and beyond.

Markets are forecasting: 

• CPI year-on-year (October 2024 vs. October 2023) to rise 2.6% from 2.4%in the prior month
• Core CPI year-on-year to remain unchanged at 3.3%
• CPI month-on-month (October 2024 vs September 2024) to remain unchanged at 0.2%
• Core CPI month-on-month to remain unchanged at 0.3%.

Headline and core CPI inflation is expected to remain unchanged at 0.2% and 0.3% MoM in October, but the year-over-year headline number is expected to rise 2.6% from 2.4%.

Further evidence of cooling price pressures may support the case for another rate cut in December.

Traders are currently pricing in a 65% probability of another 25-basis point rate cut by the end of 2024.

A softer-than-expected US CPI report has the potential to drag the DXY lower. Should the CPI report beat market forecasts, the DXY could push higher.

Oil hit by China demand woes

Oil tumbled last Friday after Chinese stimulus measures disappointed investor expectations.

Brent shed roughly 1.6% last week as renewed concerns about demand in China and uncertainty over the impacts of Trump’s presidency weighed on the global commodity.

Last week, we discussed how Trump’s victory may pressure oil – possibly hitting oil producing nations like Nigeria.

His return to the White House could result in higher domestic oil production while potential tariffs on China may impact global demand.

This combination of rising supply and falling demand could enforce fresh pressures on oil which is down 4% since the start of 2024. Should oil prices continue to weaken, this could be a threat to countries who acquire a chunk of their revenues from oil sales.

In a press conference to discuss the central bank’s decision, Powell stressed that he’s confident inflation will recede to the Fed’s target of 2%, although the economy is taking longer to reach that point than policymakers previously expected.

Powell also sought to tamp down any concerns the Fed could reverse course in response to persistent inflation, saying it is “unlikely the next policy rate move will be a hike.”

Fed Chairman Jerome Powell has repeatedly said the central bank prefers to keep rates high until inflation retreats to about 2% on an annual basis, rather than risking cutting too early and fueling another round of price spikes. Despite the Fed’s flurry of interest rate hikes, inflation remains stubbornly high, with March prices rising 3.5% from a year earlier, fueled by higher housing and gasoline prices.

The latest annual consumer price index compared with July’s 2.9 % pace, and was marginally below the estimate of 2.6% from economists polled by Reuters.

According to data published by the Bureau of Labor Statistics on Wednesday, core CPI, which excludes volatile food and energy prices held steady at 3.2%, the inflation data marks one of the last major economic releases ahead of the Fed’s next meeting on September 18, when it is expected to lower rates from their current range of 5.25 to 5.5%, a 23-year high.

Last month, a weak payrolls report for July sparked fears of an economic downturn in the US, pushing traders to increase bets that the US central bank would cut rates by a larger-than-usual half point in September.

The data for August, released last Friday, showed that US employers had added 142,000 new jobs that month, up sharply from a downwardly revised figure of just 89,000 for July, but still below consensus forecasts.

The Fed has been seeking assurance that inflation is cooling sustainably before lowering interest rates. But evidence of sharper deterioration in the jobs market could push the central bank to cut rates more aggressively.