Weekly market outlook

Weekly Market Outlook: More CPI data, UK Fiscal Statement & US retail earnings 

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Weekly Market Outlook — Following another US inflation surprise, CPI data will dominate most other markets this week, shifting attention away from the greenback. This week will be busy for the United Kingdom, as apart from the economic releases, the budget statement will be watched amid lingering worries about high borrowing costs. CPI data from the UK and Canada should cause more volatility this week. As for China and Japan, growth indicators will be crucial, while retail sales will be the main highlight in the United States this week.

Key Data to watch on the Economic Calendar this week 

Monday, 14 November

  • AUD: Monetary Policy Meeting Minutes 
  • EUR: Industrial Production (SEP) 
  • China: Industrial Production (OCT) 
  • China: Retail Sales (OCT) 

Tuesday, 15 November

  • GBP: Claimant Count Change (OCT) 
  • EUR: Germany ZEW Economic Sentiment Index (NOV) 
  • EUR: Employment Change Prel (Q3) 
  • USD: US PPI (OCT) 
  • AUD: Wage Price Index (Q3) 

Wednesday, 16 November

  • GBP: UK Inflation data (OCT) 
  • Canada: CPI (OCT) 
  • US: Retail Sales (OCT) 
  • AUD: Employment Change (OCT) 

Thursday, 17 November

  • USD: Phily Fed Manufacturing Index (NOV) 
  • GBP: Autumn Forecast Statement 
  • EUR: EU CPI Final (OCT) 

Friday, 18 November

  • GBP: Retail Sales (OCT) 
  • USD: US Existing Home Sales (OCT) 

GBP — Another budget for the pound

Over the past couple of months, the sterling has been experiencing a tumultuous period, and this week could be no different. The week will be jam-packed with key economic indicators as well as the government’s much-anticipated Autumn statement. Jeremy Hunt, the new chancellor, is reportedly planning to announce a combination of tax increases and spending cuts to fill a fiscal hole created by the previous administration. 

Weekly Market Outlook

The battle for economic credibility will be fierce on Thursday between Hunt and Prime Minister Rishi Sunak. For the pound, the event could be positive as long as the government’s own numbers match the independent forecasts provided by the Office for Budget Responsibility. Although Hunt and Sunak might go too far with their fiscal tightening, this might not necessarily be bad for the sterling and could even boost it, as it might mean the Bank of England doesn’t have to raise interest rates as aggressively. 

While the incoming data is expected to confirm a deteriorating economic backdrop with high inflation, the currency will be hard-pressed to shed its cloudy outlook entirely. The September employment report will be released on Tuesday, followed by the October consumer price index on Wednesday. On Friday, we will receive retail sales figures to close out the week.

EURO — A relatively quiet week for the EU

As the European calendar is mostly made up of second-tier releases, the euro’s recovery above parity against the US dollar is likely to slow down. 

The report on industrial production for September, along with the quarterly employment estimates and the second reading of Q3 GDP will provide investors with a better idea of how the Eurozone economy is coping with the energy and inflation storm. Nevertheless, Thursday’s final estimate of October inflation is likely to cause some movement in the euro, but only if it’s revised upward. 

Other than that, the euro will follow the dollar and ECB speakers, who are becoming more hawkish every day. Because investors increasingly see the UK and Eurozone economies as interdependent, with their fates closely tied to how the energy crisis unfolds, recent changes in sentiment towards the pound might also affect the euro.

USD — Analysts expect US retail sales to rise

After CPI inflation unexpectedly eased to below 8.0% y/y in October, dollar bulls suffered their biggest setback in more than six years. There is more likelihood of the Fed raising rates by 50 basis points in December than by 75, but there could be some support for the US currency this week from the latest retail sales data.

Weekly Market Outlook

According to forecasts, retailers’ sales rebounded by 0.8% month-over-month in October after being flat in September. Upbeat consumer data alone, however, might not be enough to support the dollar. Other releases, such as producer prices on Tuesday, industrial production on Wednesday, and housing numbers on Thursday and Friday, are unlikely to significantly brighten the outlook. 

The equity markets stand a good chance of adding to their gains in the coming week as the dollar might be stuck on the back foot for quite some time.

AUD RBA Minutes & Jobs to watch

After the latest Aussie CPI metrics, traders will be looking for more explanations as to why the RBA chose a 25bps hike over a 50bps hike. As a result of the aforementioned inflation developments, markets will be watching for any indications that an additional 25bps may be needed this year. Despite its determination to return inflation to target, the central bank expects to increase rates further in the near future. Further, the Board’s assessment of inflation and labor market conditions will determine the size and timing of future rate adjustments. 

On Tuesday, the RBA releases the minutes of its previous meeting, and on Wednesday and Thursday, the quarterly wage and employment numbers are released. As the Aussie rises from its October lows against the Dollar, a stronger-than-expected rise in employment would lessen the likelihood of no change in rates in December. Employment Change is expected to be 25k (previously 0.9K), unemployment is expected to remain at 3.5%, and the participation rate is also expected to remain at 66.6%.

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