Week Ahead: US CPI, PPI, and Retail Sales Set to Influence US Dollar Movements

　　

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What happened in the market last week?

• UK economy stalled in Q3, with GDP remaining flat. Despite avoiding the forecasted decline, detailed indicators are concerning. Consumer spending, government spending, and business investment all declined, signaling weak domestic demand.
• A mild recession is still expected in the UK through late 2023 and early 2024.
• Reserve Bank of Australia (RBA) resumed rate hikes after remaining on hold since July, implementing a 25 bps policy rate increase to 4.35%
• In contrast to other major central banks, some institutions, like the RBA, are continuing to raise interest rates.

Source: VT Markets MT4

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

Last week, the US dollar weakened against other major currencies. This decline was largely due to increasing doubts about the likelihood of further interest rate hikes, despite Federal Reserve Chair Jerome Powell’s indications that tighter monetary policy might be necessary to control inflation. Initially, Powell’s comments led to market turbulence. However, the sentiment shifted following signs of a softening labor market and speculation about a potential slowdown in inflation, as indicated by the upcoming Consumer Prices Index (CPI).

Investors began to speculate that US interest rates might have reached their peak, prompting a reversal in short positions in equities and bonds. As a result, the dollar index decreased by 0.11% to 105.79. Concurrently, the euro strengthened against the dollar, gaining 0.16% to reach $1.0683. The market’s anticipation of a potential decrease in CPI and lower yields were key factors contributing to the dollar’s weakening.

• The price of gold (XAU) against the US Dollar decreased by 2.68%
• The British Pound (GBP) depreciated by 1.1% against the US Dollar
• The Euro (EUR) experienced a decrease of 0.34% against the US Dollar
• The Dow Jones Industrial Average (DJ30) increased by 0.34%
• The US Oil (USO) rose by 0.7% against the US Dollar
• The US Dollar (USD) strengthened against the Japanese Yen (JPY) by 1.45%
• The NASDAQ 100 (NAS100) rose 2.61%

Source: VT Markets Economic Calendar

What to focus on this week?

This week is anticipated to be one of heightened activity for market participants, with a particular focus on developments within the United States. Noteworthy economic indicators, specifically the Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales data, are scheduled for release. These reports are expected to introduce substantial volatility and potentially set the directional course for the US Dollar.

Here are some notable highlights for the week:

UK Claimant Count Change (14 November 2023) 

The Claimant Count Change in the UK rose to 20,400 in September 2023, up from -9,000 in August 2023.

The next figures will be released on 14 November, with analysts anticipating an increase of 25,000.

Takeaway: The slight increase in the number of people claiming unemployment benefits in the UK during September indicates a slowdown in the British economy. The expected rise in the Claimant Count Change for October suggests the possibility of a further economic slowdown. Such developments might negatively impact the British Pound.

US Consumer Price Index (14 November 2023) 

Consumer prices in the US increased by 0.4% month-on-month in September 2023, easing from a 0.6% rise recorded in August.

Analysts expect a 0.1% increase in the figures for October, which are due for release on 14 November.

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 slight increase for October suggests that inflation is not changing much. This might have a positive effect on the US Dollar.

Australia Wage Price Index (15 November 2023)

Australia’s seasonally adjusted wage price index rose by 3.6% year-on-year in Q2 2023, slightly down from the 3.7% increase seen in Q1 2023.

The data for Q3 2023 is set to be released on 15 November, with analysts expecting an uptick to 3.8%.

Takeaway: The Australian Wage Price Index is expected to significantly impact the Australian Dollar this week. Should the data align with predictions, it is likely that the AUD will experience a modest increase.

UK Consumer Price Index (15 November 2023)

The UK’s inflation rate remained steady at 6.7% in September 2023, consistent with the 18-month low observed in August.

The upcoming CPI figures are projected to indicate a further decrease to 4.9%.

Takeaway: The UK CPI data is anticipated to be a key market mover for the Pound sterling this week. Considering the forecasted figures, there is a possibility that the Pound sterling might weaken.

US Producer Price Index (15 November 2023)

Producer prices in the US increased by 0.5% month-over-month in September 2023, the smallest rise in three months after a 0.7% increase in August.

The data for October 2023 will be released on 15 November, with analysts forecasting a modest 0.1% increase.

Takeaway: The rise in producer prices for final demand in September indicates a potential escalation in inflationary pressures. However, the anticipated modest increase in October points to a possible rebound in producer prices, signaling a renewed upward trend. Monitoring these trends is crucial, as shifts in producer prices can significantly impact consumer prices and overall inflation levels. This trend might exert a slight positive influence on the US Dollar.

US Retail Sales (15 November 2023)

Retail sales in the US increased by 0.7% month-on-month in September 2023, following an increase of 0.8% in August.

Analysts expect a slight decrease of 0.1% in the October figures, which are scheduled for release on 15 November.

Takeaway: The upcoming US retail sales report, a key determinant of the US Dollar’s performance, will offer crucial insights into consumer spending in the US. Should the projected figures be accurate, there might be a slight weakening of the US Dollar.

Employment in Australia (16 November 2023)

Employment in Australia grew by 6,700 in September 2023. Meanwhile, the unemployment rate unexpectedly fell to a three-month low of 3.6% in the same period, a marginal decrease from the figure recorded in August.

Analysts expect the employment figures for October 2023 to reveal an increase of 24,900, with the unemployment rate predicted to remain steady at 3.6%. The data are scheduled to be released on 16 November.

Takeaway: The upcoming Australian Employment Change report, a significant factor influencing the performance of the Aussie Dollar, will offer important insights into the labor conditions in Australia. If the projected figures are accurate, there is a possibility of witnessing a strengthening of the Aussie Dollar.

UK Retail Sales (17 November 2023)

Retail sales in the UK declined by 0.9% month-over-month in September 2023, reversing a 0.4% increase in August.

Analysts anticipate that UK retail sales for October 2023, which are to be released on 17 November, will increase by 0.3%.

Takeaway: The upcoming UK retail sales report will yield valuable insights into consumer spending trends in the UK. Should the projected figures align with reality, we might observe a significant movement in the British Pound.

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