The Week Ahead: Central Bank Speeches and Economic Data Dominate Global Forex Landscape

Highlights

• US retail sales figures and Fed Chair Powell will drive demand for the US dollar.
• UK employment, inflation, and retail sales figures may fuel bets on a Bank of England rate hike.
• GDP numbers from China will influence market risk sentiment on Wednesday.

For the Dollar:

The NY Empire State Manufacturing Index kickstarts the week. Although the US manufacturing sector accounts for less than 25% of the US economy, investors remain cautious due to concerns about a deteriorating macroeconomic environment.

On Tuesday, retail sales figures for September will be pivotal. Better-than-expected numbers will likely fuel bets on a Fed rate hike. Consumption fuels demand-driven inflation, forcing the Fed to hike rates to impact disposable income and curb spending.

Initial jobless claims and the Philly Fed Manufacturing Index will be in focus on Thursday. Tight labor market conditions will likely support wage growth and consumer spending, another bugbear for the Fed.

Other economic indicators include industrial production and housing sector numbers. However, these are likely to have a limited impact on sentiment toward Fed monetary policy.

Beyond the economic indicators, Fed Chair Powell is on the calendar to speak on Friday. Investors will respond to forward guidance on monetary policy goals after the US CPI Report.

FOMC members Harker, Williams, and Bowman are also on the calendar to speak this week.

For the EUR:

On Monday, trade data for the Eurozone will put the EUR/USD in the spotlight. Investors will likely be sensitive to weaker-than-expected trade data amid the rising threat of a prolonged euro area recession.

ZEW Economic Sentiment figures (Tues) for Germany and the Eurozone will garner investor interest. With the German economy under scrutiny, a slump in sentiment toward the German economy would likely pressure the EUR.

Eurozone inflation figures for September also warrant consideration on Wednesday. Hotter-than-expected inflation numbers may pressure the ECB to push interest rates higher.

With inflation in focus, ECB commentary will influence monetary policy sentiment and the buyer appetite for the EUR/USD.

ECB President Christine Lagarde is on the ECB calendar to speak on Monday and Wednesday. However, investors must also consider ECB Executive Board member speeches. Andrea Enria (Mon), Anneli Tuominen (Mon), Luis de Guindos (Tues), Kerstin af Jochnick (Tues), Frank Elderson (Wed), and Elizabeth McCaul (Fri) will deliver speeches.

For the Pound:

It could be a pivotal week for the Pound and the Bank of England.

UK average earnings, claimant counts, and unemployment figures will draw investor interest on Tuesday. A pickup in wage growth would support consumption and fuel demand-driven inflationary pressures. Wage growth remains a consideration for the Bank of England (BoE) and could lead to higher interest rates.

The UK CPI Report will also influence BoE monetary policy expectations on Wednesday. A pickup in wage growth and hotter-than-expected inflation figures would raise bets on a BoE rate hike.

UK retail sales figures will wrap up a big week for the Pound.

Beyond the numbers, BoE Chief Economist Huw Pill will speak on Monday ahead of Monetary Policy Committee Member Swati Dhingra on Tuesday. Hawkish forward guidance on interest rates would drive demand for the GBP/USD.

For the Loonie:

Canadian inflation figures for September will be in focus on Tuesday. A pickup in inflationary pressures would support demand for the Loonie.

On Friday, retail sales figures also need consideration. Higher-than-expected retail sales figures and a pickup in inflationary pressure may fuel bets on a Bank of Canada rate hike.

Beyond the numbers, the Bank of Canada Business Outlook Survey will also influence buyer appetite for the Loonie.

Out of Asia:

For the Aussie Dollar:

The Aussie Dollar will sit in the hands of the RBA on Tuesday. Recent inflation figures leave further RBA rate hikes on the table. The RBA meeting minutes will give investors a better sense of how far the RBA is willing to go on interest rate hikes.

Employment figures on Thursday will also influence the buyer appetite for the Aussie Dollar. Tighter labor market conditions may support bets on an RBA interest rate hike to curb consumption.

For the Kiwi Dollar:

Third-quarter inflation figures will put the Kiwi Dollar in the spotlight on Tuesday. Sticky inflation would support bets on a higher-for-longer interest rate path.

The recent RBNZ Rate Statement suggested the RBNZ ending the monetary policy tightening cycle. Nonetheless, pressure on the RBNZ to keep rates higher for longer would support buyer appetite for the Kiwi dollar.

For the Japanese Yen:

Consumer inflation figures for September will influence Japanese Yen trends. However, investors should consider the prerequisites for the Bank of Japan (BoJ) to move away from negative rates.

Recent BoJ commentary has highlighted the need for wage growth and demand-driven inflation to force a move away from an ultra-loose policy stance.

Industrial production (Mon) and trade data (Thurs) also warrant consideration. A fall in industrial production and exports would reflect a weak demand environment and likely support the BoJ monetary policy stance.

Out of China

The Chinese economy will be in the spotlight on Wednesday. Third-quarter GDP figures will draw interest alongside industrial production, retail sales, and unemployment figures.

Stimulus plans may limit the impact of weaker-than-expected GDP numbers. However, investors will likely remain sensitive to the industrial production and retail sales figures. After an improvement in trade terms, better-than-expected figures would support demand for riskier assets and commodity currencies.

On Friday, the PBoC will set loan prime rates. However, with stimulus measures on the horizon, economists expect the PBoC to leave rates unchanged.