(Week of 9th - 13th) October 2023
(Week of 9th - 13th) October 2023
11 October 2023
Wednesday
On October 11, 2023, the United States is scheduled to release both the Core Producer Price Index month-over-month (m/m) and the Producer Price Index m/m. Additionally, the Federal Open Market Committee (FOMC) Meeting Minutes will be made available on the same day.
USD - Core PPI m/m
Economists and investors pay close attention to core PPI m/m data because it can provide clues about the direction of future consumer price inflation (CPI). CPI is the most widely used measure of inflation, and it is used to determine cost-of-living adjustments for Social Security and other government programs.
In August, the Core Producer Price Index (PPI), which excludes the relatively unstable sectors of food and energy, maintained a year-over-year growth rate of 2.2%, consistent with what consensus forecasts had anticipated. However, when viewed on a month-to-month basis, the Core PPI displayed a modest deceleration, with a 0.2% increase, compared to the previously revised 0.4% gain noted in July. Importantly, these figures aligned precisely with the expectations of economists, signaling a stable trend in the core PPI.
The forecast for the US Core PPI m/m is reading another increase of 0.2%, meaning that potentially, the inflation control rate might not be sustainable, signaling a longer period of high-inflation economy.
The upcoming news announcement for the Core Producer Price Index month-over-month (PPI m/m) is scheduled to be released on Wednesday, October 11, 2023, at 1:30 PM GMT+1.
USD- PPI m/m
The PPI m/m serves as a leading indicator for consumer inflation, as increased charges by producers for goods and services often result in higher costs being transferred to consumers.
In August 2023, the month-over-month U.S. producer prices demonstrated a significant 0.7% increase, surpassing market expectations. This notable surge was primarily driven by a 2% upturn in goods prices, prominently influenced by a substantial 10.5% surge in energy costs. Meanwhile, services recorded a more modest uptick of 0.2%, primarily attributed to the rising expenses related to transportation and warehousing.
The forecast for the US PPI m/m is reading another increase of 0.4%. Compared to the 0.2% increase in Core PPI m/m, this would mean that Energy and Food prices received by the producers for their output are also increasing.
The PPI m/m news release is set for Wednesday, October 11, 2023, at 1:30 PM GMT+1.
USD - FOMC Meeting Minutes
The FOMC Meeting Minutes serve as a comprehensive account of the Federal Open Market Committee's recent meeting, offering detailed insights into the economic and financial factors that informed their decisions regarding interest rate adjustments. These minutes are a vital record of the committee's deliberations, conducted eight times annually, focusing on a broad spectrum of subjects such as the current state and future prospects of the U.S. economy, associated risks, and their intended strategies for monetary policy.
The FOMC Meeting Minutes is scheduled for Wednesday, October 11, 2023, at 7:00 PM GMT+1.
12 October 2023
Thursday
October 12, 2023, will bring notable economic announcements from both the UK and the US. The UK is scheduled to release its monthly GDP data, while the US will provide updates on the Core Consumer Price Index (CPI) month-over-month (m/m), CPI m/m, CPI year-over-year (y/y), and unemployment claims. The market anticipates increased volatility in response to these significant news releases.
GBP - GDP m/m
Traders are keenly interested because it provides the most thorough evaluation of economic activity and functions as the predominant gauge of the economy's overall well-being.
In July 2023, the UK economy contracted by 0.5% month-over-month, marking the largest decline of the year and reversing June's 0.5% growth, missing market expectations of a 0.2% decrease. The services sector, notably human health activities (-3.4%) and computer programming (-3.4%), was a major contributor to this contraction, partly due to NHS strikes and cancellations. Consumer-facing services stagnated, with retail trade down by 1.2%. Additionally, production declined by 0.7%, primarily driven by a 0.8% contraction in manufacturing. Construction also fell by 0.5%. Over the three months leading up to July, GDP increased by 0.2%.
The forecast for the UK GDP m/m announcement is reading an increase of 0.1%, which would be a momentary relief from the July outcome, which pointed towards a shrinking economy.
The GDP m/m data is scheduled for release on Thursday, October 12, 2023, at 7:00 AM GMT+1.
TL;DR
USD - Core CPI m/m
Food and energy prices, while constituting approximately one-quarter of the Consumer Price Index (CPI), are known for their volatility and can obscure the underlying trend. Consequently, both the Federal Open Market Committee and traders generally prioritize the Core CPI data, which excludes these volatile components. Consumer prices hold significant sway over overall inflation, and fluctuations in inflation are pivotal for currency valuation, as they often prompt central banks to adjust interest rates in adherence to their inflation management objectives.
In August 2023, core consumer prices in the United States, excluding volatile items like food and energy, rose by 0.3% from the previous month, exceeding expectations of a 0.2% increase. This acceleration was driven by higher costs for services unrelated to energy, notably in shelter and transportation services, important indicators for demand-driven inflation closely watched by the Federal Reserve. Additionally, the Consumer Price Index (CPI) showed increased prices for new vehicles, apparel, medical care commodities, and services, while prices for used cars and trucks declined for the third consecutive month. Year-on-year, core consumer prices advanced by 4.3%.
The forecast for the US Core CPI m/m is reading an increase of 0.3%, following the existing trend of increasing inflation.
The upcoming release of Core CPI m/m data is set for Thursday, October 12, 2023, at 1:30 PM GMT+1.
TL;DR
USD - CPI m/m
Consumer prices have the greatest impact on overall inflation trends. Inflation plays a crucial role in currency valuation because as prices increase, central banks often raise interest rates to fulfill their mandate of containing inflation.
In August 2023, the Consumer Price Index (CPI) in the United States registered a seasonally adjusted increase of 0.6% to reach 306.269 points, marking a notable acceleration compared to the 0.2% gain observed in July. The primary contributors to this monthly rise were gasoline prices, which saw a substantial increase, and shelter costs, which continued their upward trend for the 40th consecutive month. Notably, the energy index surged by 5.6% in August, with gasoline prices spiking by 10.6%. Additionally, the cost of shelter increased by 0.3%, and the food index saw a 0.2% uptick, driven by increases both in the index for food at home and food away from home.
The forecast for the US CPI m/m is reading an increase of 0.4%, meaning the food and energy prices might not have risen as much as the rest of the categories.
The next CPI m/m is set to be released on Thursday, October 12, 2023, at 1:30 PM GMT+1.
TL;DR
USD - CPI y/y
Consumer price movements have a significant impact on the broader inflation rate. In the context of currency valuation, inflation assumes importance as the central bank may choose to raise interest rates as a means to fulfill its mandate of managing and containing inflation when prices in the economy are on an upward trajectory.
The Consumer Price Index in the United States increased by 3.7% year-on-year to 307.026 points in August 2023, which was an acceleration from the 3.2% growth recorded in the previous month. Market expectations had predicted a smaller 3.6% increase in the CPI to reach 306.976 points
The forecast for the US CPI y/y is reading an increase of 3.8%.
The next CPI y/y is set to be released on Thursday, October 12, 2023, at 1:30 PM GMT+1.
USD - Unemployment Claims
While often categorized as a lagging indicator, the unemployment rate holds significant relevance as it serves as a key barometer of the overall economic well-being. This is due to the strong correlation between labor market conditions and consumer spending. Additionally, unemployment represents a paramount factor considered by policymakers responsible for shaping the nation's monetary policy.
The week concluding September 30th saw a marginal increase in Americans applying for unemployment benefits, ticking up by 2,000 to a total of 207,000, which comfortably undercut projections of 210,000. This figure closely trails the seven-month nadir of 202,000, reached earlier in the month. Concurrently, the number of continuing claims experienced a slight dip, descending by 1,000 to settle at 1,664,000 for the week ending September 23rd. This notably undercut the anticipated figure of 1,675,000 and lingered near a previously recorded eight-month low, hinting at a relatively successful job-finding venture by those unemployed. This information fortifies evidence that the labor market retains its historically robust stature, revealing an enhanced resilience amidst the Federal Reserve’s assertive tightening cycle and providing some flexibility for the maintenance of prolonged elevated rates.
The forecast for the US Unemployment Claims is reading a slight increase to 208,000.
The Unemployment Claims announcement is set to be made on Thursday, October 12, 2023, at 1:30 PM GMT+1.
TL;DR
13 October 2023
Friday
On Friday, October 13, 2023, China and the United States are poised to make two notable news announcements. China will unveil its CPI y/y, while the United States is scheduled to release its Preliminary University of Michigan Consumer Sentiment data.
CNY - CPI y/y
Financial confidence serves as a leading indicator for consumer spending, a pivotal component of the broader economic activity. This is typically gauged through surveys involving approximately 500 respondents, where individuals are asked to assess both the current and anticipated economic conditions.
In August, China's consumer prices saw a slight year-on-year increase of 0.1%, marking a return to positive territory. Meanwhile, declines in factory-gate prices eased, suggesting a reduction in deflationary pressures and some economic stabilization. However, analysts caution that additional policy support is required to bolster consumer demand, particularly as the labor market recovery slows and household income expectations remain uncertain. The Producer Price Index (PPI) recorded a 3.0% year-on-year decline, slightly better than anticipated. Food prices decreased by 1.7%, while non-food costs increased by 0.5%, primarily due to rising expenses related to tourism. Ongoing challenges, including crop damage from recent floods and global food supply disruptions linked to the Ukraine conflict, emphasize the need for continued vigilance.
The forecast for the Chinese CPI y/y is reading an increase of 0.2%.
China's CPI y/y data is scheduled for release on Friday, October 13, 2023, at 02:30 AM GMT+1.
TL;DR
USD - Prelim UoM Consumer Sentiment
Financial confidence, often seen as a predictor of consumer spending, plays a pivotal role in driving a significant portion of the broader economic activity. This assessment is typically derived from surveys conducted among approximately 500 consumers who are asked to evaluate both the current and future economic conditions.
In September 2023, U.S. consumer sentiment, as reported by the University of Michigan, declined from 69.5 to 67.7, falling short of the expected 69.1. This drop in sentiment reflects diminishing optimism driven by the Federal Reserve's efforts to tighten monetary policy, economic difficulties, and the increasing cost of living. Notably, assessments of current conditions dropped to 69.8, while future expectations improved to 66.3, influenced by hopes of a reduction in inflationary pressures. Additionally, year-ahead inflation expectations dipped to 3.1%, marking the lowest level since March 2021.
The forecast for the US Prelim UoM Consumer Sentiment report is reading a decrease to 67.5 points, potentially signaling lower confidence in the population's outlook on their own prospects, and the general state of the economy in the short and long term.
The Preliminary University of Michigan Consumer Sentiment data is scheduled for release on Friday, October 13, 2023, at 3:00 PM GMT+1.
Disclaimer: The market news provided herein is for informational purposes only and should not be considered as trading advice.