The US Dollar was on the back foot, alongside stocks and as US data did not impress. What’s next? US retail sales, the FOMC minutes, and the EU Summit on Brexit stand out in a busy week. Here the highlights for the next week.
US Core inflation missed expectations and weighed on the dollar. Consumer sentiment also dropped. Fear about higher interest rates and the tariffs on China sent stock markets falling at last. This triggered an angry response by Donald Trump against the Fed’s policy of raising rates, consequently sending the greenback lower. Brexit negotiations continued in full-force, with hopes for a deal in the upcoming summit. Italy remained a source of worry.
US Retail Sales: Monday, 12:30. The US economy is centered around consumption, making the publication a top-tier one. The volume of sales in August was unimpressive, but upwards revisions for July balanced the picture. Headline sales increased by only 0.1% are expected to advance by 0.7% in September. Core retail sales, which are no less important, carry expectations for a rise of 0.4% after 0.3% last time.
US Treasury report: Monday, during the US session. The US Treasury publishes its report about countries that manipulate its currencies. The focus is on China: the Trump Administration may label China as a currency manipulator, increasing the pressure on the world’s second-largest economy as part of its broadside. Various economists do not see China devaluing the yuan, but see its decline as related to a slowdown and to the strength of the US Dollar. If the Treasury labels China as a currency manipulator, it could add further pressure on stocks and strengthen the safe-haven yen.
New Zealand CPI: Monday, 21:45. New Zealand publishes inflation data only once per quarter, making every report a significant market-mover. Prices increased by only 0.4% QoQ in Q2. The fresh report for Q3 is expected to show a quicker pace of increase in the Consumer Price Index: 0.7%.
UK jobs report: Tuesday, 8:30. Britain enjoys an unemployment rate of only 4% as of July, and this is expected to remain unchanged. However, wage growth is not going anywhere fast and competes with inflation. An increase was seen in July and the same level is on the cards for August. The Claimant Count Change for August showed an increase of 8.7K. The fresh figure for September is forecast to show a more modest increase of 4.5K. A higher rise in jobless claims could be worrying.
UK inflation: Wednesday, 8:30. The UK’s Consumer Price Index rose by 2.7% YoY in August, showing increasing inflationary pressures and helping justify the Bank of England’s rate hike that month. A slower annual increase in prices is on the cards for September: 2.6%. The Retail Price Index (RPI) is projected to rise by 3.5%, repeating the same figure from the previous month. Core CPI is predicted to slow from 2.1% to 2.0% and PPI Input to rise by 0.9% MoM after an increase of 0.5% in August.
FOMC Meeting Minutes: Wednesday, 12:30. The Federal Reserve raised interest rates in September and signaled four more until the end of 2019. While they removed the words “accommodative policy”, Fed Chair Jerome Powell clarified that there is no change in policy. The meeting minutes from the event will shed some light on several important topics: do all members see the economy as doing very well? Are they concerned that inflation is not picking up? And about trade tariffs: is there a reason to be worried? The FOMC Minutes usually reveal more about the topic than the statement. It is important to note that the document is redacted until the very last moment in order to convey a message. A softer message may be seen now, after the stock market fall.
Australian jobs report: Thursday, 00:30. The economy of the land down under saw an impressive increase of 44K in August, significantly above expectations. The report for September is projected to show a modest increase of 15.2K positions, more aligned with the averages of recent years. The unemployment rate is expected to remain unchanged at 5.3%. The Australian job market is doing well despite some hiccups in the housing sector and fears about China.
EU Summit on Brexit: Thursday. The leaders of the European Union, which still includes the UK are convening for a planned summit, with Brexit being the main issue. Reaching a Brexit deal by this date was marked as a deadline, but that may slip. Both sides are reporting progress in talks after the Conservative Party Conference ended. The most thorny issue is that of the Irish Border, which is related to the customs arrangements. One option is to place Northern Ireland in a separate customs regime, thus creating a customs border in the Irish Sea. However, the idea is vehemently opposed by the DUP which props up the UK government in a “confidence and supply” deal. A Brexit deal would send the pound higher and the euro would also enjoy it. However, a more likely scenario is that the EU and the UK set a new deadline in November. The option of a second referendum and a no-deal Brexit are also on the cards. High volatility is likely.
Chinese GDP: Friday, 2:00. The world’s second-largest economy publishes its GDP very early after the quarter ends. While many raise their eyebrows at the accuracy of the data, it still moves markets. A very modest slowdown is projected for Q3: 6.6% annualized against 6.7% in Q2. Some fear that the tariffs may have caused and may cause more severe disruptions, impacting the whole world.
Canadian retail sales and inflation: Friday, 12:30. Canada publishes both critical data points at the same time. The Consumer Price Index dropped by 0.1% in August while core CPI advanced by 0.1%. Inflation could be slightly higher in September. Retail sales rose by 0.3% in July and core sales jumped by 0.9% back then. The data for August is due now.
US Existing Home Sales: Friday, 14:00. The last word of the week belongs to the American housing sector. This data point and a few others showed signs of a slowdown in the sector, contrary to the broader economy. A minor drop is on the cards for September: 5.31 million annualized unit sales against 5.34 million in August. The longer the slides continue, the greater the worries.
*All times are GMT
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