Week Ahead: All Eyes on US PPI and US CPI

　　

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.

What happened in the market last week?

• The U.S. economy had shown remarkable strength, with nonfarm payrolls exceeding expectations, increasing by 336,000 in September.
• The data for the past two months were revised upward by a net 119,00 making the performance even more impressive.
• Global financial markets experienced pressure throughout the week, largely due to the strong U.S. economy and a hawkish Federal Reserve.
• The anticipation of increased Treasury issuance in the near future has caused a significant rise in U.S. Treasury yields.

Source: VT Markets MT4

Last Week’s Market Pair Changes (All data is taken from the MT4 VT Markets)

The US dollar continued to strengthen, achieving a 12-week winning streak following a robust US jobs report for September. This performance echoed a similar streak in 2014. The dollar gained 0.5% over the week, marking an 8% overall increase over these 12 weeks. Against the yen, it recorded gains in four of the last five weeks. US nonfarm payrolls for September exceeded expectations, showing job growth of 336,000.

With a 31% chance of a rate increase next month, as indicated by CME’s FedWatch tool, the dollar index initially rose but then trimmed its gains. The euro declined against the dollar for a record 12th consecutive week. This strength in the dollar was attributed to a sell-off in US government bonds, resulting in multi-year high yields. Strong economic data in the US and the anticipation of higher interest rates contributed to this trend.

• USO/USD decreased by 9.05%
• XAU/USD decreased by 0.86%
• DJ30 decreased by 0.73%
• USD/JPY decreased by 0.26%
• EUR/USD increased by 0.18%
• GBP/USD increased by 0.43%
• NAS100 increased by 1.17%

Source: VT Markets Economic Calendar

What to focus on this week?

Several significant market developments are expected to impact the financial markets this week. In particular, we await the release of the US Consumer Price Index (CPI) and Producer Price Index (PPI). Given the potential impact of these announcements, we strongly recommend traders to exercise caution in their trading preparations, taking into account the possibility of increased market volatility.

Here are some essential economic highlights to monitor throughout the week:

US Producer Price Index (11 October 2023) 

Producer prices in the US increased by 0.7% in August 2023, the highest level since June 2022. 

New PPI data will be released on 11 October, with analysts expecting a 0.3% increase.

Takeaway: The increase in producer prices for final demand in August suggested a potential rise in inflationary pressures. However, the expected increase in September indicated a possible rebound in producer prices, signaling a renewed upward trajectory. Monitoring these trends is essential because changes in producer prices can have implications for consumer prices and overall inflation levels. This could potentially have a slight positive effect on the US Dollar.

UK Gross Domestic Product (12 October 2023)  

The British economy contracted by 0.5% month-over-month in July 2023, marking the largest decline of the year. This also represented a reversal from the 0.5% growth observed in June. 

Data for August is scheduled for release on 12 October, with analysts anticipating a 0.2% increase.

Takeaway: The contraction in the British economy in July raised concerns in the market. However, the anticipated increase in GDP for August suggests the possibility of renewed growth momentum. This could potentially have a positive effect on the British Pound.

US Consumer Price Index (12 October 2023) 

Consumer prices in the US increased by 0.6% month-over-month in August 2023, following a 0.2% rise in July. 

Analysts expect a 0.3% increase in the figures for September, which are set to be released on 12 October.

Takeaway: The slight rise indicates a deceleration in inflationary pressures. This slowdown could be attributed to various factors, such as stabilizing commodity prices or reduced demand for certain goods and services. However, the projected increase for September suggests the potential for a rebound in inflationary trends. This could have a positive effect on the US Dollar.

FOMC Meeting Minutes (12 October 2023) 

During its September 2023 meeting, the Federal Open Market Committee (FOMC) maintained the target range for its funds rate at a 22-year high of 5.25%–5.5%, following a 25 bps hike in July. 

The central bank signaled the possibility of another rate hike later this year, following potential meetings in November or December 2023.

Takeaway: After a decision to keep rates unchanged in the last meeting, the markets are now keenly observing the FOMC meeting minutes from the previous session for any potential changes. Additionally, the market is awaiting hints regarding whether the Fed will contemplate raising interest rates in November or December.

University of Michigan Consumer Sentiment Index (13 October 2023) 

The University of Michigan Consumer Sentiment Index for the US increased to 68.1 in September 2023.

Analysts expect the index to drop to 67.4 in the next set of published data.

Takeaway: The increase in consumer sentiment reflects growing optimism among consumers about the economy. This positive outlook can influence consumer spending and overall economic growth. However, a lower reading for this data could potentially have a negative effect on the US Dollar.

Make informed decisions with the most up-to-date and reliable financial data, exclusively provided by vtmarkets.com.