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This Week: USD Index’s presence above 50-day SMA may depend on CPI print

After its recent volatility-inducing policy meeting, we know the Fed remains hell bent on hiking interest rates in order to combat US inflation.

Hence, this week’s US inflation release would inform policymakers, and markets, about how high US rates have to go.

Here are the scheduled economic data releases and events for this week:

Monday, November 7

  • CNH: China October external trade
  • EUR: ECB President Christine Lagarde speech, Germany September industrial production
  • USD: Fed Speak – speeches by Boston Fed President Susan Collins, Cleveland Fed President Loretta Mester, Richmond Fed President Tom Barkin

 

Tuesday, November 8

  • AUD: Australia October household spending, November consumer confidence
  • EUR: Eurozone September retail sales
  • GBP: Speeches by BOE MPC member Catherine Mann, BOE Chief Economist Huw Pill
  • USD: US midterm elections
  • Disney 4Q earnings

 

Wednesday, November 9

  • CNH: China October CPI and PPI
  • GBP: Speech by BOE MPC member Jonathan Haskel
  • USD: Fed Speak – speeches by New York Fed President John Williams, Richmond Fed President Tom Barkin
  • US crude: EIA weekly oil inventory report

 

Thursday, November 10

  • AUD: Australia November consumer inflation expectations
  • USD: US October inflation, weekly initial jobless claims, speeches by Dallas Fed President Lorie Logan, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester

 

Friday, November 11

  • EUR: Germany October CPI (final)
  • GBP: UK 3Q GDP, September industrial and manufacturing production, external trade
  • USD: US November consumer sentiment

 

 

For the October US inflation data due Thursday, here are the median estimates by economists:

  • 7.9% year-on-year advance for the headline consumer price index (CPI). That would be lower than September’s 8.2%.
     
  • 6.5% year-on-year advance for Core CPI (excluding more-volatile food and energy prices). That’s a slight easing from September’s 6.6%.


And in the wake of last week’s FOMC meeting, markets now expected US interest rates to peak at 5.1% by mid-2023. That’s significantly higher than the 4.65% peak forecasted just this time last month.

With such expectations at play at the moment, higher-than-expected CPI prints which give the Fed the greenlight to raise interest rates even higher should reawaken Dollar bulls.

Such a narrative may see this equally-weighted USD index testing the upper trendline around 1.27 as immediate resistance.

USD Index’s presence above 50-day SMA may depend on CPI print

However, note how at the time of writing, this equally-weighted USD Index is testing its 50-day simple moving average (SMA) once more for support.

The dollar’s pullback came as last Friday’s higher-than-expected US unemployment rate suggested that the Fed may not have much left to do to incur more “demand destruction” intended to cool inflationary pressures.

After all, the Fed has already front-loaded its hikes to the tune of 375 basis points in “cumulative tightening” so far this year.

If the slew of “Fed Speak” this week do not share in Fed Chair Jerome Powell’s hawkishness, that may make it harder for this USD index to keep its head above its 50-day SMA.

Ultimately, the incoming CPI print should hold greater sway over whether this USD Index will end the week above or below its 50-day SMA.

 

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