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This Week: US CPI may dictate next Dollar move

They say it’s rarely about just one data point.

But the coming week may be an exception to the rule as markets will zero in on the latest US inflation data released on Tuesday, amidst these other major economic data releases and events:

Monday, September 12

  • GBP: UK July monthly GDP, industrial production, external trade
  • EUR: ECB Executive Board member Isabel Schnabel’s speech

 

Tuesday, September 13

  • AUD: Australia August household spending, business confidence, September consumer confidence
  • GBP: UK July unemployment rate, August jobless claims
  • EUR: Germany August CPI (final), September ZEW survey expectations
  • USD: US August CPI
  • Twitter shareholders to vote on sale to Elon Musk
  • Starbucks’s investor day

 

Wednesday, September 14

  • JPY: Japan July industrial production (final)
  • GBP: UK August CPI
  • EUR: Euro area July industrial production
  • US crude: EIA weekly oil inventory report

 

Thursday, September 15

  • NZD: New Zealand 2Q GDP
  • AUD: Australia August unemployment rate, September consumer inflation expectations
  • USD: US weekly initial jobless claims, August retail sales, industrial production

 

Friday, September 16

  • CNH: China August industrial production, retail sales, jobless rate
  • EUR: Eurozone August CPI (final)
  • USD: US September consumer sentiment

 

Tomorrow’s (Tuesday, Sept 13th) release of the US consumer price index (CPI) is the last major economic release ahead of the FOMC meeting on 21 September. The data also comes during the Fed’s blackout period when central bank officials go into quiet time and do not remark on monetary policy.

The most recent comments from Fed Chair Powell continued with a hawkish bias, essentially telling markets the world’s most powerful central bank wasn’t done yet in hiking rates and was fully focused on acting forcefully to bring down inflation.

In other words, this rate-hiking job will carry on even if growth is impacted.

The chances of another jumbo-sized rate hike of 75bps currently sits at over 90%, up from last weeks near coin toss probability with a half-point rate rise.

 

The headline CPI print may be weighed down by the rapid drop in oil prices so the core reading will probably give a truer read on the current pace of price pressures and the risks ahead.

As things stand, here’s what economists are forecasting for the upcoming CPI prints:

  • August CPI = 8% year-on-year (lower than July’s 8.5%)
  • August core CPI (minus food and energy) = 6.1% year-on-year (higher than July’s 5.9%)


But it seems only a huge surprise could push markets back to the 50bp rate hike.

This would take the steam out of the recent dollar rally which hit 20-year highs last week.

US CPI may dictate next Dollar move

 

UK data pose risks for GBPUSD, after BOE delays decision

The UK is observing a period of mourning following the death of Queen Elizabeth II.

The Bank of England meeting originally scheduled for Thursday has been postponed until the following Thursday 22 September.

But we still currently have the usual mid-month data dump including GDP, jobs numbers, CPI and retail sales. The announcement of an energy price cap by the new UK Prime Minister cuts the chance of a more prolonged downturn and possibly a technical recession. Economists reckon inflation will be lowered by around 4-5% in the autumn from a potential peak of 16%+.

As for the upcoming UK August CPI, falling fuel prices are likely to have capped the headline figure.

Still, economists predict that the CPI should persist in the double-digit territory (10.1% forecasted for August CPI, matching July’s year-on-year figure).

The pound is still stuck in a long-term downtrend with headwinds aplenty.

Last week’s low just about pierced the pandemic spike bottom at 1.1405 but buyers pushed sterling up with its first positive week in four.

GBPUSD awaits UK data dump

The weak undertone may persist until markets get more colour on the cost implications of the government energy bill action.

Winter fuel disaster has been averted for now, but how the UK pays for this and its sovereign risk premium remain questionable over the longer-term.

 

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