The US dollar had a bad week, losing ground across the board with no exception. US inflation and consumer figures stand out in the week before the all-important Fed meeting. Here are the highlights for the upcoming week.
The euro was not convinced by Draghi’s concern about the exchange rate and advanced. The pound got a boost from hopes for a soft Brexit. The Canadian dollar was thrust forward with a rate hike from the BOC and the yen advanced on safe-haven flows stemming from heightened tensions with North Korea and the hurricanes the US suffers from. And what about the dollar? The Fed seems less hawkish with Dudley’s caution about the economy and Fischer’s resignation. Topping it off with the damage from hurricanes Harvey and Irma, and buying dollars is less inspiring.
- UK inflation report: Tuesday, 8:30. While the UK economy has slowed down in a late reaction to Brexit, price rises still remain elevated, as a result of the weaker pound. Higher inflation led to musings about a rate hike which in turn have later diminished with lower inflation. Headline CPI is now expected to rise from 2.6% to 2.8% and that could give a boost to the pound.
- JOLTS Job Openings: Tuesday, 12:00. The number of open jobs is another measure of the job market. While the figure is somewhat late (we now get the numbers for July), the Fed gives the report its importance. In June, the figure leaped to 6.16 million annualized openings, sending the dollar higher. A drop to 5.96 million is expected.
- US PPI: Wednesday, 12:30. Producer prices provide an insight on future consumer prices and also serve as a warm-up to the CPI report. After both headline PPI and core PPI dropped by 0.1% in July, rises are now on the cards. PPI is projected to rise by 0.3% and core PPI by 0.2%.
- Australian jobs report: Thursday, 1:30. Australia enjoyed a healthy jobs market so far in 2017. The gain of 27.9K jobs in July is forecast to be followed by a gain of 19.2K in August. The unemployment rate is expected to remain unchanged at 5.6%. The Australian economy’s situation also provides some insight into the Chinese one.
- Swiss rate decision: Thursday, 7:30. The Swiss National Bank convenes only once per quarter to make its Libor Rate Decision. The SNB left its rate at -0.75% since removing the peg to the euro in a shock move in January 2015. No change is on the cards now. While the 1.20 floor under EUR/CHF has been removed, the SNB occasionally intervenes to weaken the franc and they are likely to stick to their pledge now.
- UK rate decision: Thursday, 11:00. The post-Brexit interest rate of 0.25% is highly likely to remain unchanged. However, it will be interesting to see if there are any shifts in the voting patterns. Two out of eight members voted for a rate hike in August. That did not convince the pound at the time. Has anybody changed their minds? The fresh strengthening of sterling will likely alleviate pressures to hike rates.
- US CPI: Thursday, 12:30. Jobs are aplenty but inflationary pressures are nowhere to be seen. That has left the Federal Reserve quite puzzled and markets to lower expectations. CPI is expected to rise by 0.3% m/m in August and core CPI by 0.2%. Both advanced by 0.1% in July. Year over year, core inflation has been stuck at 1.7% for several months. Will move now?
- US retail sales: Friday, 12:30. Consumption is key to the US economy. After a few mediocre months, the report for July included healthy increases in spending as well as upwards revisions. Headline retail sales are predicted to rise by a modest 0.1% after 0.6% beforehand. Core retail sales carry expectations for 0.5%, a repeat of the number seen in the previous month.
- US consumer confidence: Friday, 14:00. This is the early version of the preliminary survey by the University of Michigan for September. After a score of 96.8 in August’s final read, a small slide to 95.3 is on the cards.