Weekly Market Outlook— This week brings several important economic releases that will provide insight into macroeconomic developments in the US, UK, and Eurozone following PMI survey data that indicated persistent inflation and recession risks. The US retail sales data and inflation data will be closely watched this week. After PMI surveys showed easing costs, inflation data should indicate further moderating inflationary pressures. Consumer sentiment data will provide a timely indicator of household affordability. UK unemployment, industrial production, and GDP data will also be released, with the latter likely to confirm a contraction. The German inflation data are expected to confirm the 70-year high, presenting a picture of rising stagflation risks.
Key Data to watch on the Economic Calendar this week
- UK Jobs Report (Sep)
- UK: GDP (AUG)
- US: PPI (SEP)
- US: FOMC Minutes
- US: CPI (SEP)
- German Final CPI (Sep)
- US: Retail Sales (SEP)
USD — Inflation & Retail sales Data, FOMC Minutes on Focus
During another busy week for the US economy, key economic data are released, with inflation figures receiving the most attention. Inflation is expected to ease from 8.3% in August to 8.1% in September, according to the markets. Inflation pressures are starting to moderate as a result of the energy crisis, but the country’s energy crisis has still had profound effects on prices. Despite rising interest rates and an ongoing cost of living squeeze, retail sales and consumer sentiment data will provide insight into household trends.
According to forecasts, sales will increase by 0.2%, but if pessimism persists it will be very interesting to see how that unfolds. Minutes of the latest FOMC meeting are out Wednesday. This will reveal how the FOMC viewed the economic situation when hiking interest rates by another 75 basis points for a third consecutive time. Following that, the Michigan consumer sentiment survey and retail sales for September will be released on Friday.
For the dollar, there are no signs of a reversal in trend. While inflation may cool a little, it will still remain well above the Fed‘s target, forcing policymakers to keep the war on. There must be a dramatic change in the power dynamics in order for the ‘king dollar’ to be overthrown. The big banks have also begun their earnings season.
There will likely be a lot of hiring freezes/layoff announcements, cost-cutting measures, and mostly pessimistic outlooks this earnings season. In light of a weakening consumer economy, Wall Street will be interested in how bad banks assess consumer health.
GBP — Bruised pound awaits UK data
Government officials in the United Kingdom scaled back plans to cut taxes for the upper class following a collapse in the nation’s currency and bond markets. As the Bank of England intervened, this helped restore calm. Despite this, sterling remains an unattractive investment. As a result of the nation’s twin deficits, the BoE is hesitant to raise interest rates with any real force, fearing that it will deepen the recession it already expects and lead to financial instability.
Last week saw the UK dominated headlines following market turmoil sparked by the verdicts on new tax laws that have affected the economy. Economic releases will be the focus of this week’s schedule. In particular, GDP and labor market information will provide an update on the performance of the UK economy. Despite the growing price pressures on businesses and firms, the unemployment data – due out on Tuesday – is expected to show a low level of unemployment. There are likely to be slowdowns in growth for both the GDP and industrial production figures, which may also contribute to the growing signs of a recession.
EURO — German CPI to Watch
There are three weeks until the ECB‘s next policy meeting, and it’s still unclear whether the central bank will decide to keep 75 basis points or increase it to 100 basis points. Policymakers are deeply concerned about the risks and the ramifications of going too far too fast when they decide to super-charge the tightening cycle. ECB President Christine Lagarde’s recent appearances, combined with final inflation readings, could provide more insight into the central bank’s current stance.
A preliminary estimate by the Federal Statistical Office shows that Germany’s consumer price inflation rate rose to 1.9 percent month-over-month in September 2022, the biggest increase since March. It will be interesting to see how the German CPI stands on Thursday.
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