The US dollar remained strong and enjoyed mostly upbeat data. Can we expect further gains? The focus remains on the greenback with the FOMC minutes, US retail sales and the all-important inflation figures Here are the highlights for the upcoming week.
The US economy still looks good, despite the devastation that the hurricanes created and the mess in the jobs report: the US lost jobs for the first time since 2010 but wage growth accelerated. The euro was on the back foot once again due to European politics: this time it was the crisis in Catalonia and Spain’s forceful crackdown. Uncertainty about PM May’s position weighed on the pound while the RBA kept the pressure on the Aussie. The path of least resistance remained a stronger dollar.
- JOLTS Job Openings: Wednesday, 14:00. The number of job openings in the US economy is eyed by the Federal Reserve, even if it is a lagging indicator. In July, the number of openings remained above 6 million annualized, at 6.17 million, beating expectations. A level of 6.06 is on the cards now.
- FOMC Meeting Minutes: Wednesday, 18:00. In the September, meeting, the announced the beginning of reducing its balance sheet, as widely expected. They also left their rate hike projections unchanged for 2017 (one more hike) and 2018 (3 hikes). The eagerness to continue raising rates comes despite slower inflation, something that Fed Chair Yellen described as a “mystery”. The minutes from that meeting are released now. It is important to note that the text is edited until the very last minute, leaving room for sending the desired message to markets. The focus will be on how worried they are of low inflation.
- US PPI: Thursday, 12:30. Changes to producer prices eventually reach consumers. Headline PPI rose by 0.2% in August while core PPI advanced by only 0.1%. Will we see stronger numbers this time? Headline PPI is expected to rise by 0.4% while the core number is predicted to advance by 0.2%.
- Mario Draghi talks: Thursday, 14:15. The President of the ECB will talk in a panel in Washington and may shed some more light on the upcoming decision to reduce its bond-buying scheme. Will he still express concern about the exchange rate? EUR/USD is lower since he voiced his complaints.
- Lael Brainard talks: Thursday, 14:15. Brainard is a permanent voter in the FOMC and her opinions are in line with the majority. She could provide a valuable to the latest jobs report and more importantly, about the potential rate hike in December.
- Jerome Powell talks: Thursday, 14:30 and also Friday at 17:00. Powell is also a Fed Governor who rarely discusses monetary policy. Nevertheless, his words are of higher importance now as he is one of the candidates to head the Fed. In his previous appearance, Powell did not offer insights about interest rates.
- US CPI: Friday, 12:30. As aforementioned, low inflation is a “mystery” to the Fed. With ongoing gains in employment, inflation should have risen a long time ago. That’s what the models say. In August, prices rose by 0.4% in the headline CPI but did not impress with 0.2% in core CPI, which is more important to the Fed. Year over year, core CPI remains stuck at 1.7%, after having topped 2% earlier in the year. Headline CPI is expected to rise by 0.6% this time, while core CPI by only 0.2%.
- US retail sales: Friday, 12:30. Consumption is the vast majority of the US economy and the numbers have been somewhat disappointing in August. Headline sales dropped by 0.2% while core sales advanced by 0.2%. Overall sales volume is predicted to bounce back by 1.5% and core sales by 0.9%.
- US consumer sentiment: Friday, 14:00. When consumers are more confident, they spend more money. The correlation is not always there, but this leading indicator moves markets, especially as it gets the last word of the week. The final read for September stood at 95.1 points. We now get the preliminary release for October which is forecast to be very similar: 95.4 points.