The Week Ahead: Will They Won’t They? The US CPI Report and Fed Speakers in Focus

Highlights

• US consumer inflation, consumer spending, and Fed speakers to guide the markets on the Fed rate path.
• The Pound could be in for a choppy week, with wage growth, inflation, and retail sales in focus.
• Mid-week stats from China will influence commodity currencies and the appetite for riskier assets.

The US Dollar

On Tuesday, the US CPI Report kickstarts another big week for the US dollar. After several Fed pivots, the CPI Report could dictate the fate of the December Fed interest rate decision.

Retail sales figures will also be pivotal on Wednesday. An upward trend in consumption would fuel demand-driven inflation, forcing the Fed into a more hawkish Fed rate path.

On Thursday, the weekly jobless claims will draw investor interest. Tight labor market conditions support wage growth, fueling consumption and demand-driven inflation. A more hawkish Fed rate path would raise borrowing costs and reduce disposable income, impacting spending and dampening inflation.

Other stats include producer prices (Wed), NY Empire State Manufacturing Index (Wed), industrial production (Thurs), Philly Fed Manufacturing Index (Thurs), and housing sector numbers (Fri). While the numbers tend to have less influence, producer prices warrant consideration.

Beyond the numbers, investors should monitor Fed speakers throughout the week. Fed Vice Chair John Williams (Tues/Thurs) and FOMC members Christopher Waller (Thurs), Loretta Mester (Thurs), and Mary Daly (Fri) are on the calendar to speak.

The EUR

On Tuesday, German ZEW Economic Sentiment figures for November need consideration. The markets expect a German recession. A pickup in sentiment toward the economy could provide the EUR/USD brief relief.

However, Eurozone GDP numbers for the third quarter will likely have more significance.

On Wednesday, Eurozone industrial production and trade figures also need consideration before Eurozone inflation numbers on Friday.

Weaker-than-expected GDP, trade, industrial production numbers, and sticky inflation could affect sentiment toward the Eurozone economic outlook. Sticky inflation may force the ECB to pursue a hawkish interest rate trajectory at the expense of the economy.

With inflation in focus, ECB commentary also needs consideration. ECB Chief Economist Philip Lane (Tues) and Executive Board members Andrea Enria (Tues/Thurs), Frank Elderson (Tues), and Luis de Guindos (Thurs) are on the calendar to speak.

ECB President Christine Lagarde will speak on Thursday and Friday.

The Pound

It could be a choppy week for the Pound. The UK labor market will be in the spotlight on Tuesday. Wage growth will likely be a focal point. An upswing in wages could fuel consumption and demand-driven inflationary pressures. With the Bank of England (BoE) concerned about wage growth, the figures may influence market bets on the timing of a BoE rate cut.

On Wednesday, the UK CPI Report will also be influential. However, a marked softening in inflation could also influence sentiment toward the BoE rate path.

UK retail sales wrap up an important week for the Pound. An unexpected fall in consumption would ease demand-driven inflationary pressure and the need for a hawkish interest rate trajectory.

BoE commentary warrants consideration in the week. Reaction to the numbers will influence buyer appetite for the Pound.

BoE Governor Andrew Bailey (Mon) and Chief Economist Huw Pill (Tues) are on the calendar to speak. MPC members Catherine Mann (Mon), Sarah Breeden (Mon), Swati Dhingra (Tues), Jonathan Haskel (Wed), and Sir Dave Ramsden (Thurs/Fri) also deliver speeches.

The Loonie

Wholesale sales (Wed) and house starts (Thurs) will be in focus. However, the numbers are unlikely to impact the Loonie. Economic indicators from China, the weekly crude oil reports, and the OPEC monthly report will likely be focal points.

On Friday, RMPI numbers for October will need consideration.

The Australian Dollar

On Tuesday, Australian business confidence figures for October will influence the appetite for the Aussie dollar. A pickup in business confidence could signal plans to increase staffing levels.

Tighter labor market conditions could fuel consumption and demand-driven inflationary pressures. A more hawkish RBA rate path raises borrowing costs, reducing disposable income and affecting consumption.

On Wednesday, wage growth figures for the third quarter will move the dial. A pickup in wage growth could signal a positive outlook for consumer spending.

However, employment figures for October also need consideration on Friday. Softer labor market conditions would ease wage growth pressures early in the fourth quarter.

From elsewhere, economic indicators from China will also impact the Aussie dollar.

The Kiwi Dollar

On Wednesday, electronic card retail sales figures will influence the appetite for the Kiwi dollar. Another pullback in sales could ease demand-driven inflationary pressures and the need for a hawkish RBNZ rate path.

However, producer prices for the third quarter will likely garner more interest on Friday. Falling producer prices would signal a weak demand environment. A downward trend in producer prices could influence consumer price trends.

From elsewhere, economic indicators from China will also impact the Kiwi dollar.

The Japanese Yen

On Wednesday, GDP numbers for Q3 will kickstart the week for the Japanese Yen. A deterioration in economic conditions could force the Bank of Japan to maintain an ultra-loose monetary policy stance.

However, industrial production (Wed) and trade data (Thurs) also warrant consideration. Trade figures for October may have more impact on the Yen. Deteriorating trade terms would align with BoJ concerns about the economic outlook.

While the stats will influence, investors must monitor BoJ commentary and intervention warnings to bolster the Yen.

Out of China

On Wednesday, industrial production, retail sales, unemployment, and fixed asset sales for October will be in focus. Recent private sector PMI numbers signaled a deterioration in macroeconomic conditions.

Weaker-than-expected industrial production and retail sales figures could impact the appetite for commodity currencies and riskier assets.