The US dollar took a hit, finally correcting its gains, but it didn’t fall too far. UK inflation data, Mario Draghi and Janet Yellen’s speeches, US Retail sales are the major events on our calendar for this week. Here is an outlook on the main market movers coming our way.
Despite continuous positive US data, the FOMC minutes defied expectations for a possible rate hike in the near future, sending the dollar down. The minutes revealed a debate on the necessary normalization period, which the hawks considered too long. Fed minutes also showed that some policymakers feared a stronger dollar will generate downward pressure on inflation and that global economic growth is on a downward trend. Will the dollar continue to decline? In Europe, German numbers were certainly weak, but that didn’t hurt the euro as much as Draghi’s repeat of his commitment to battle low inflation and his words about a rate hike not coming before 2017. Comments about the yen kept the Japanese currency bid and the Aussie recovered despite wobbles in its employment data. Canada enjoyed strong job growth.Updates:
- UK inflation data: Tuesday, 8:30. The annual inflation rate in the UK declined from 1.6% to 1.5% in August, amid lower prices of petrol, food and non-alcoholics drinks. Meanwhile, core inflation, excluding food, alcohol, tobacco and energy, edged up1.9%. However the low inflation bides well with consumer’s purchasing power due to a slow wage growth. UK inflation is expected to decline to 1.4% this time.
- German ZEW Economic Sentiment: Tuesday, 9:00. German investor confidence declined to a 21 month low of 6.9 in September following a 8.6 reading in August amid stronger political tensions in Europe. Analysts expected an even lower figure of 5.2. This was the lowest reading since December 2012. German economy slowed down in the third quarter which may weaken growth in the second half of the year. German investor confidence s expected to plunge to 0.2.
- UK Employment data: Wednesday, 8:30. U.K. unemployment rate fell to the lowest level in six years, indicating continued strength in the labor market. Likewise, U.K. jobless claims dropped 37,200, far better than the 30,000 decline estimated by economists. That pushed the total below 1 million for the first time since September 2008. The number of workers rose by 74,000 to 30.6 million. Despite the slow growth in wages, Bank of England Governor Mark Carney is confident that job market growth will eventually boost salaries. U.K. jobless claims are expected to decline further by 34,200 now.
- Mario Draghi speaks: Wednesday, 7:00, 18:00. Back to the ECB HQ in Frankfurt, Draghi is scheduled to make two speeches in two separate events. At this point we will already have the industrial output number for the euro-zone (it was poor for Germany) as well as some news from the meeting of the financial chiefs. Draghi moves the markets even if he doesn’t say anything new.
- US retail sales: Tuesday, 12:30. U.S. retail sales gained 0.6% in August amid a buying spree of automobiles and a range of other goods. Economists expected a 0.3% increase as in July. Meanwhile core sales expanded 0.3% exceeding expectations for a 0.2% rise. Consumer sentiment also soared, hitting a 14-month high in September. However lack of real wage growth may weigh on retail sales in the future but the third quarter looks promising. Retail sales are expected to decline by 0.1% , while core sales are predicted to rise 0.2%.
- US PPI: Tuesday, 12:30. Wholesale prices in the U.S. remained changed in August from the previous month, held back by a plunge in energy costs as well as indicating low inflation in the production pipeline. In the last 12 months, wholesale prices increased 1.8%. The PPI excluding food and energy inched 0.1% from the prior month. Producer prices are predicted to gain 0.1% this time.
- US Unemployment Claims: Thursday, 12:30. Fewer Americans filed claims for unemployment benefits last week, reducing the average number of applications to the lowest level in eight years reaching 287,750. Applications declined 1,000 to 287,000 last week, suggesting employers keep their workers, expecting continued economic growth including expansion in hiring. The number of people receiving benefits has also fallen steadily to just 2.38 million in the week ended Sept. 27. Jobless claims are expected to reach 286,000 this week.
- US Philly Fed Manufacturing Index: Thursday, 14:00. Manufacturing activity in the Philadelphia area declined in September to 22.5 from 28 in August which was the highest since March 2011. Economists expected a slightly higher reading of 22.8. Despite the fall in September, the survey reflects continued growth in the region’s manufacturing sector as many indicators for future manufacturing conditions reflect general optimism about growth in activity and employment over the next six months. Manufacturing activity in the Philadelphia area is anticipated to decline further to 19.9.
- US Building Permits: Friday, 12:30. The number of permits issued for privately-owned housing units reached a seasonally adjusted annual rate of 998,000 in August following the revised July rate of 1,057,000. Economists expected a total of 1,040,000. Single-family permits in August reached 626,000, 0.8% below the revised July figure of 631,000. Authorizations of units in buildings with five units or more were at a rate of 343,000 in August. The number of permits is expected to grow to 1.04 million.
- Janet Yellen speaks: Friday, 12:30. Federal Reserve Chair Janet Yellen is scheduled to speak in Boston. Yellen may shed more light on the FOMC minutes released last week and the gloomy growth outlook despite positive US economic data. Market volatility is expected.
- US Consumer Sentiment: Friday, 13:55. The September reading of University of Michigan’s consumer sentiment soared to 84.6, the highest since July 2013, following 82.5 in the final August reading. Despite consumers’ fears of a slowdown in employment growth, anticipations were high on wage expansion. Consumer expectations jumped to 75.6 from the 71.3 reading last month and above a forecast of 73.0. Consumer sentiment s expected to reach 84.3 this time.
* All times are GMT.
In our latest podcast, we talk about the US labor market, run down the FOMC minutes, reflect on falling oil and discuss next week’s events:
- For EUR/USD, check out the Euro to Dollar forecast.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- For USD/CAD (loonie), check out the Canadian dollar
- For the kiwi, see the NZDUSD forecast.