The US dollar was on the back foot in the week of Thanksgiving and now we are back to business with a busy week. A mix of housing data, inflation figures, and an update on GDP stand out Here are the highlights for the upcoming week.
The Fed is less confident about inflation. We heard that from Yellen and then from the FOMC minutes. This hurt the greenback across the board and especially against the yen. The euro enjoyed upbeat PMIs and also some hope for Germany to get out of the political crisis that weighed on the euro early in the week. The pound rode higher on hopes that the UK will accept EU demands on the divorce bill. The loonie struggled to capitalize on higher oil and fell on weak retail sales. The Aussie dipped to lower ground but stabilized.
In the euro-zone, issues with German coalition talks weighed on the common currency, but the effect was short-lived.
US New Home Sales: Monday, 15:00. Sales of new homes trigger wide economic activity such as infrastructure spending. This gauge advanced significantly to 667K annualized in September. A drop to 627K is predicted.
Bill Dudley speaks, Tuesday, 00:00. The outgoing president of the New York Fed will speak in California and may clarify the Fed’s stance on inflation after the dovish meeting minutes. Dudley used to be a dove but has expressed optimism in recent months. Is a December rate hike still on the cards? Probably. But in 2018, everything is possible. Dudley will also speak on Wednesday at 13:30, but the first weekly appeance is more important.
US CB Consumer Confidence: Tuesday, 15:00. The Conference Board’s measure of consumer confidence rose to 125.9 points in October, beating expectations. Will it drop now? A slide to 123.9 is on the cards now.
US GDP (second release): Wednesday, 13:30. The first release of Q3 GDP beat expectations with an annualized level of 3%, similar to the robust growth also seen in Q2: 3.1%. We are getting the second out of three publications. An upgrade to 3.3% is predicted given the upbeat updates for the third quarter.
Janet Yellen testifies, Wednesday, 14:00. The outgoing Fed Chair Janet Yellen will testify in Washington. Her recent worries that weak inflation is not transitory and the dovish meeting minutes set the ground for her testimony. Has she changed her mind on the December rate hike? Once again, the probability is low, but a softer stance in 2018 by her successor Powell is likely. The focus remains inflation.
Euro-zone inflation: Thursday, 10:00. After the major countries have already released their own figures, we get the flash figures for the whole euro area. October was quite disappointing with 1.4% in headline inflation and only 0.9% in core CPI, quite a setback after this figure had already advanced. Healine inflation is expected to bounce to 1.6% and core inflation to tick up to 1%.
US Core PCE Price Index: Thursday, 13:30. This is the inflation indicator that the Federal Reserve prefers, making it of importance even though it lags the regular CPI report. The Core PCE stood at 1.3% y/y in September and may now rise to 1.4%, still below the Fed’s 2% target. Month over month, a rise of 0.2% is projected.
Canadian jobs report Friday, 13:30. Canada publishes its employment report before the US, something that does not happen very often. In October, Canada reported a healthy gain of 35.3K jobs but the unemployment rate ticked up to 6.3%. We may see a slide in the number of positions now.
Canadian GDP: Friday, 13:30. After an excellent first half, things have significantly slowed down in the third quarter of 2017. A drop of 0.1% was reported for August. We now get the data for September, thus concluding Q3. Is this already a better month? Canada is unique in publishing GDP data on a monthly basis.
US ISM Manufacturing PMI: Friday, 15:00. This forward-looking survey also serves as the first hint towards the Non-Farm Payrolls that will be released in the following week. A score of 58.7 was seen in October, slightly below the previous levels but certainly looking good and well above the 50-point threshold that separates expansion and contraction. A small slide to 58.4 is on the cards.
*All times are GMT
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