2018 started off where 2017 left off: the dollar remained under pressure, but didn’t really collpase. Will this continue? US inflation and retail sales numbers stand out in the second week of the year. Here are the highlights for the upcoming week.
The greenback made a recovery attempt on a great ISM Manufacturing PMI score and as the Fed minutes did not rock the boat. However, that did not last too long. The NFP missed expectations with only 148K jobs gained. Wages remained at 2.5% y/y. The euro stood out in challenging the highs while the pound managed to shrug off mediocre PMI data. Oil prices continued advancing but the Canadian dollar was unable to make a big move.
John Williams talks Monday, 18:35. The president of the San Francisco Fed will participate in a panel about inflation in Washington. Not only is the topic very relevant for the dollar, but Williams is a voting member this year. Will he express concern about the slow rise in wages? Or will he remain optimistic as he usually is?
JOLTS Job Openings: Tuesday, 15:00. The number of job openings is eyed by the Fed, thus making it important despite the lag: we will now get the report for November, a few days after the jobs report for December. After showing 6 million annualized job openings in November, a small rise to 6.05 million is on the cards now.
Crude Oil Inventories: Wednesday, 15:30. Oil prices are becoming more important due to the recent surge in prices. It is also important to note that there is an inverse correlation between oil prices and the dollar. Further gains for oil imply further pressure on the greenback. The weekly report of inventories is a mover for the black gold. A draw of 7.4 million barrels was seen in the latest report.
ECB Meeting Minutes: Thursday, 12:30. The European Central Bank began reducing its bond-buying scheme in January, in a decision made already in October. However, there are differences between the members of the ECB about the next moves and the level of worry about low inflation. In the December meeting, Draghi made an attempt of sorts to push the euro lower, but this clearly failed. The minutes from that meeting may reveal where the wind is blowing within the ranks of the Frankfurt-based institution about the potential end to QE in September, or perhaps only later on.
US PPI: Thursday, 13:30. Producer prices are sometimes seen as “inflation in the pipeline” but recent rises haven’t resulted in higher consumer prices. Headline PPI rose by 0.4% in November, meeting expectations. A rise of 0.2% is forecast now. Core PPI surprised to the upside with +0.3% and 0.2% is on the cards.
William Dudley speaks, Thursday, 20:30. The outgoing president of the New York Fed will be speaking in New York. His views often reflect those of outgoing Fed Chair Janet Yellen. Incoming Fed Chair Jay Powell has always voted with the consensus, so perhaps Dudley’s thoughts also reflect those of the incoming Chair.
US CPI: Friday, 13:30. The Fed is puzzled with low inflation. With upbeat GDP growth and a robust rise in employment, the economic models point to higher prices. Yet this isn’t happening and it may slow down the Fed’s pace of raising rates. In November, headline CPI inflation rose by 0.4% but core CPI disappointed with only 0.1% and not for the first time. We will now get the last report for 2017 and if core CPI remains stuck, incoming Fed Chair Jay Powell will have a rough start to his tenure. Both headline and core CPI are expected to rise by 0.2% this time.
US Retail Sales: Friday, 13:30. The American economy is focused on consumption, making this report a top-tier one. While inflation is gaining in importance, retail sales will still move markets despite being released at the same time. Back in November, the volume of sales increased by 0.8% while core sales jumped by 1%. Have Americans been doing a lot of Christmas shopping? Headline retail sales are predicted to rise by 0.5% while core sales carry expectations for +0.4%.
*All times are GMT
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