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Except for Thursday, the past week was quite calm. Market participants reacted rather reservedly to the results of the midterm elections to the US Congress, but reacted strongly to the report last Thursday of data on inflation in the US. As follows from the report of the Bureau of Labor Statistics, inflation in the US fell in October to 7.7% on an annualized basis (against 8.2% in September and the forecast of 8.0%). The core consumer price index (excluding food and energy prices) fell to 6.3% in October from 6.6% a month earlier. Thus, the likelihood of a 75 basis point Federal Reserve rate hike in December has decreased. On the contrary, now market participants, according to CME Group, are pricing in an 80% chance of a 50 bps Fed rate hike in December. The published CPI indices caused a sharp fall in the dollar on Thursday. Labor statistics also added fuel to the fire, also published on Thursday, according to which the number of initial applications for unemployment benefits increased (to 225,000 from 218,000 a week earlier), also turning out to be worse than the forecast of growth to 220,000 Although this is a minor change, it also had a negative impact on the dollar: the Fed has repeatedly linked the parameters of monetary policy with the state of the labor market in the country. The pace of monetary tightening could also slow down if labor market indicators help.
Due to a strong fall on Thursday, the DXY dollar index closed the week deep in negative territory, falling more than 3%, also falling below 108.00 (from 2-month-old levels).
Next week, which is likely to be quieter, market participants will pay attention to the release of important macro statistics on Japan, the eurozone, China, the US, the UK, and Australia.
In the Treasury Committee of the British Parliament, the head of the Bank of England and some of the members of the monetary policy committee of the BoE will give explanations on the current economic policy, the situation and economic prospects. At this time, the volatility in the pound quotes can rise sharply. If the tone of the report is soft, then the British stock market will receive support, and the pound will fall. Conversely, the tough rhetoric of the BoE on curbing inflation, which implies an increase in the interest rate in the UK, will lead to a strengthening of the pound. But this is in a normal economic situation in the country and the world, which cannot be said about the current moment.
Since the inflation report hearings last for several hours, they can create volatility in the market, and especially in the pound quotes, all the time.
The level of influence on the markets is from low to high.
In the previous 2Q, the country's GDP grew by +0.9% (+3.5% in annual terms) after falling by -0.1% (-0.5% in annual terms) in the 1st quarter of 2022 , up +1.1% (+4.6% YoY) in Q4 2021, down -0.9% (-3.6% YoY) in Q3, growth in the 2nd quarter by +0.5% (+1.5% in annual terms) and falling in the 1st quarter of 2021 by -1.0% (-3.7% in annual terms). The data point to the uneven recovery of the Japanese economy after its collapse due to the coronavirus pandemic in 2020.
The preliminary release implies that in the 3rd quarter of 2022, Japan's GDP grew by +0.3% (+1.1% in annual terms), which is a positive factor for both the yen and the Japanese stock market.
Better-than-expected data is likely to help the Japanese stock market and the yen rise.
*) an upward trend in the GDP indicator is considered a positive factor for the national currency (yen), and a low result is considered negative (or bearish).
This document, which is a detailed account of the last meeting of the RBA, provides insight into the economic conditions that influenced its decision on the level of interest rates.
If the RBA is positive about the state of the labor market in the country, GDP growth rates, and also shows a hawkish attitude towards the inflationary forecast in the economy, the markets regard this as a higher probability of a rate hike at the next meeting, which is a positive factor for the AUD. The soft rhetoric of statements by the bank's leaders regarding, first of all, inflation will put pressure on the AUD.
"The Board will do everything necessary to ensure that over time, inflation in Australia returns to the target level - said the governor of the central bank Philip Lowe. - This will require further interest rate hikes in the future."
Economists have raised their forecasts for a tightening policy of the RBA amid a very tight labor market in the country and an increased savings rate (previously they predicted a level of 2.6% by December 2022 and the same level next year).
They now expect 3.1% by the end of the year and a peak of 3.35% in Q1 2023. If the published protocol contains unexpected or additional information regarding RBA monetary policy issues, the volatility in AUD quotes will increase.
The level of influence on the markets is from low to high.
The Retail Sales Level Index is released monthly by China's National Bureau of Statistics and evaluates the total volume of retail sales and cash generated. It is the main indicator of consumer spending, which accounts for the majority of overall economic activity. It is also considered an indicator of consumer confidence and reflects the state of the retail sector in the short term.
The growth of the index is usually a positive factor for the CNY; a decrease in the indicator will negatively affect the CNY.
Previous index values (in annual terms) +2.5%, +5.4%, +2.7%, +3.1%, -6.7%, -11.1, -3.5, +6.7 (in February 2022) after rising by +8% in the last months of 2019 and falling by -20.5% in February 2020).
This is still weak data, which indicates the uneven pace of recovery in this sector of the Chinese economy after a strong fall in February-March 2020. If the data turns out to be weaker than the forecast, then the CNY could weaken sharply.
Outlook: In October 2022, retail sales in China grew by +0.9% (year-on-year).
The level of influence on the markets is medium to high.
As a key indicator of labor market dynamics, this report, published monthly by the UK Office for National Statistics (ONS), includes data on average earnings for the last 3 months (with and without bonuses), as well as data on unemployment in the UK, also for the period last 3 months.
Growth in earnings is a positive factor for the GBP, indirectly indicating the growth of the consumer ability of the population and stimulating inflation. The low value of the indicator is a negative factor for the GBP.
It is expected that the average salary, including bonuses, has increased again over the last calculated 3 months (July-September) after an increase of +6.0%, +5.5%, +5.2%, +6.4%, +6.8%, +7.0%, +5.6%, +4.8%, +4.3%, +4.2% in previous periods; no bonuses - also increased
(after +5.4%, +5.2%, +4.7%, +4.4%, +4.2%, +4.2%, +4.1%, +3.8 %, +3.7%, +3.8% in previous periods).
If the data turns out to be better than the forecast and / or previous values, then the pound is likely to strengthen. Data worse than forecast/previous values will have a negative impact on the pound.
It is also expected that for 3 months (from July to September) unemployment was at the level of 3.3% (against 3.5%, 3.6%, 3.8%, 3.8%, 3.8%, 3. 7%, 3.8%, 3.9% in previous periods).
Decrease in the unemployment rate is a positive factor for the pound, growth of unemployment is a negative factor.
Also, when drawing up a trading plan for this day, take note of the time when data from the British labor market is released, an increase in volatility in pound quotes is expected.
The level of influence on the markets is medium to high.
Eurostat will publish a report with updated data on eurozone GDP for the 3rd quarter. There are 3 versions of the quarterly GDP, published at intervals of approximately 20 days - Preliminary, Updated, Final (final release). The pre-release is the earliest and therefore tends to have the most impact on the markets. This report reflects the general economic performance of the eurozone countries and has a significant impact on the decision of the ECB on monetary policy.
GDP growth means an improvement in economic conditions, which makes it possible (with a corresponding increase in inflation) to tighten monetary policy, which, in turn, usually has a positive effect on national currency quotes.
The release of this report usually causes an increase in volatility in EUR quotes. It is likely that the release of the report with data on eurozone GDP for the 3rd quarter will be released with positive indicators. Data worse than forecast/previous values will have a negative impact on EUR quotes.
Previous values: +0.8% (+4.1% YoY) in Q2 2022, +0.6% (+5.4% YoY in Q1 2022), + 0.3% (+4.6% YoY) in Q4, +2.2% (+3.9% YoY) in Q3, +2.2% (+14.3% YoY) in Q2 and a -0.3% drop (-1.3% YoY) in Q1 2021.
The preliminary estimate for the 3rd quarter was: +0.2% (+2.1% in annual terms).
The level of influence on the markets is medium to high.
The leading indicator Producer Price Index (PPI) is one of the leading indicators of inflation in the United States, which evaluates the average change in wholesale producer prices. Higher production costs raise wholesale prices, which are ultimately passed on to the consumer, driving up inflation. In normal economic conditions, a strong result strengthens the dollar.
Previous values of the indicator: +0.4% (+8.5% in annual terms), -0.1% (+8.7% in annual terms), -0.5% (+9.8% in annual terms ), +1.1% (+11.3% YoY), +0.8% (+10.8% YoY), +0.4% (+10.9% YoY), +1.6% (+11.5% YoY), +0.9% (+10.3% YoY), +1.2% (+10.0% YoY) in January 2022 of the year. The data indicate some easing of inflationary pressure, including on the Fed when it makes its next decision to tighten monetary policy. If the data turns out to be better than the forecast, the dollar is likely to strengthen.
The level of influence on the markets is average.
This leading indicator of a country's foreign trade balance reflects the weighted average price of 9 dairy products sold at an auction organized by Global Dairy Trade (GDT) in percentage terms and is usually published every 2 weeks.
The economy of New Zealand still has signs of raw materials in many respects, and the bulk of New Zealand's exports are dairy products and food products of animal origin (27%, according to 2020 data). Therefore, the decline in world prices for dairy products has a negative impact on NZD quotes, as it signals a decrease in export earnings coming to the New Zealand budget.
Conversely, an increase in the dairy price index has a positive effect on the NZD.
Previous values: -3.9%, -4.6%, +2.0%, +4.9%, -2.9%, -5.0%, -4.1%, -1.3% , +1.5%, -2.9%, -8.5%, -3.6%, -1.0%, -0.9%.
The level of influence on the markets is from low to medium.
The consumer price index (CPI) reflects the dynamics of retail prices and is a key indicator of inflation. Consumer prices account for most of the overall inflation. Estimating the level of inflation is important for the central bank in determining the parameters of the current monetary policy.
A reading lower than forecast/previous could trigger a weaker pound as low inflation forces the BoE to ease its monetary stance. And, on the contrary, rising inflation and its high level will put pressure on the BoE in the direction of tightening its monetary policy, which in normal economic conditions is assessed as a positive factor for the national currency.
Previous values of the indicator (in annual terms): 10.1%, 9.9%, 10.1%, 9.4%, 9.1%, 9%, 7%, 6.2%, 5.5%, 5.4%, 5.1%, 4.2%. The data indicate that inflation is accelerating.
Forecast for October: 10.3% (in annual terms).
The level of influence on the markets is high.
The US Census Bureau will publish the next monthly report on retail sales in the US. This leading indicator of consumer spending reflects the total sales of retailers. Consumer spending accounts for most of the overall economic activity of the population, while domestic trade accounts for the largest part of GDP growth. A relative decrease in the indicator may have a short-term negative impact on the dollar, and an increase in the indicator will have a positive effect on the USD.
Previous values: 0%, +0.3%, 0%, +0.8%, -0.1%, +0.7%, +1.4%, +0.8%, +4.9% (in January 2022).
Forecast for October: +0.8%.
The level of influence on the markets is high.
The Retail Reference Group indicator measures volume across the entire retail industry and is used to calculate price indices for most products. A high result strengthens the US dollar, and vice versa, a weak report weakens the dollar. Data worse than the values of the previous period and / or the forecast may negatively affect the dollar in the short term.
Previous values: +0.4%, 0%, +0.8%, +0.7%, -0.3%, +0.5%, +1.1%, -0.9%, +6 .7% in January 2022.
Forecast for October: -0.3%.
The level of influence on the markets is high.
Core Consumer Price Index (Core CPI) from the Bank of Canada reflects the dynamics of retail prices (excluding fruits, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation and tobacco products) and is a key indicator of inflation. Consumer prices account for most of the overall inflation. Estimating the level of inflation is important for the management of the central bank in determining the parameters of the current monetary policy.
Given that the inflation target for the Bank of Canada is in the range of 1%-3%, the growth of the indicator (CPI and Core CPI) above this range is a harbinger of a rate increase and a positive factor for the CAD.
If the expected data turns out to be worse than the previous values, then this will negatively affect the CAD. Data better than previous values will strengthen the Canadian dollar.
Previous values of the indicator (in annual terms): 6.0%, 5.8%, 6.1%, 6.2%, 6.1%, 5.7%, 5.5%, 4.8%, 4 .3%, 4.0%, 3.6%. The data indicate that inflation is accelerating.
Forecast for October: 6.3% (in annual terms).
The level of influence on the markets is high.
This Australian Bureau of Statistics report is an extremely important indicator of the state of the Australian labor market. Reflecting the monthly change in the number of Australians employed, it is also an important leading indicator of consumer spending, which accounts for the majority of overall economic activity.
The growth of the indicator has a positive impact on consumer spending, which stimulates economic growth. A high reading is positive for the AUD, while a low reading is negative.
Previous values of the indicator: +900 in September, +33500 in August, -40900 in July, 88400 in June, +60600 in May, +4000 in April, +17900 in March, +77400 in February, +12900 in January 2022.
Forecast for October: -12200.
The unemployment rate is an indicator that assesses the ratio of the share of the unemployed population to the total number of able-bodied citizens. The growth of the indicator indicates the weakness of the labor market, which leads to a weakening of the national economy. The decrease in the indicator is a positive factor for the AUD.
Previous values of the indicator: 3.5% in September and August, 3.4% in July, 3.5% in June, 3.9% in May, April and March, 4.0% in February, 4.2% in January.
If the values of the indicators from this report turn out to be worse than the forecast, then the Australian dollar may fall sharply in the short term. Better-than-expected data will have a positive impact on the AUD.
Forecast for October: 3.6%.
The level of influence on the markets is medium to high.
The Consumer Price Index (CPI) determines the change in prices in a certain basket of goods and services over a given period, being a key indicator for assessing inflation and changing consumer preferences.
In the core consumer price index (Core Consumer Price Index, Core CPI), food and energy are excluded from the calculation for a more accurate estimate.
Estimating the level of inflation is important for the management of the central bank in determining the parameters of the current monetary policy. A reading lower than forecast/previous could trigger a weaker euro as low inflation forces the European Central Bank to stay loose on monetary policy. Conversely, rising inflation and its high level will put pressure on the ECB to tighten its monetary policy, which in normal economic conditions is assessed as a positive factor for the national currency.
Previous CPI values (annualized): +9.9%, +9.1%, +8.9%, +8.6%, +8.1%, +7.4%, +7.4%, +5.9%, +5.1% (in January 2022).
Previous Core CPI values (annualized): +4.8%, +4.3%, +4.0%, +3.7%, +3.8%, +3.5%, +3.0%, +2.7%, +2.3% (in January 2022).
The preliminary estimate for October was: +1.5% (+10.7: in annual terms).
The level of influence on the markets (final assessment) is medium.
The US Department of Labor will publish a weekly report on the state of the US labor market with data on the number of primary and secondary claims for unemployment benefits. The state of the labor market (together with data on GDP and inflation) is a key indicator for the Fed in determining the parameters of its monetary policy.
The result is higher than expected and the growth of the indicator indicates the weakness of the labor market, which negatively affects the US dollar. The drop in the indicator and its low value is a sign of the recovery of the labor market and may have a short-term positive impact on the USD.
Initial and re-claims are expected to remain at pre-coronavirus lows, which is also positive for the dollar, indicating the stability of the US labor market.
Previous (weekly) figures for initial jobless claims: 225,000, 217,000, 214,000, 226,000, 219,000, 190,000, 209,000, 208,000, 218,000, 228,000, 237,000, 245,000
Previous (weekly) values for repeated claims for unemployment benefits: 1,493,000, 1,438,000, 1,383,000, 1,364,000, 1,365,000, 1,346,000, 1,376,000, 1,401,000, 1,401,000, 1,437,000, 1,412,000.
The level of influence on the markets is medium to high.
The Retail Sales Index is the main measure of consumer spending, which accounts for the majority of overall economic activity, and is published monthly by the UK Office of National Statistics (ONS). The index is considered an indicator of consumer confidence, and also reflects the state of the retail sector in the short term. The growth of the index is usually a positive factor for the national currency; a decrease in the indicator will negatively affect the GBP. Previous values of the indicator (in annual terms): -6.9%, -5.6%, -3.2%, -6.1%, -4.7%, -5.7%, +1.3%, +7.2%, +9.4% (in January 2022).
The level of influence on the markets is medium
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