Edition 74｜October 17, 2016
The U.S. dollar gained against other major currencies on Friday after the upbeat U.S. retail sales and producer prices data, spurring speculations for the Federal Reserve to raise interest rate within this year. The Commerce Department reported that U.S. retail sales rose 0.6% for September following 0.2% decline in the previous month. Meanwhile, U.S. producer prices broadly strengthened, indicating the economy is on a strong pace to withstand the next rate hike by the Fed within this year. The reports supported the FOMC minutes for September meeting which highlighted several officials showing hawkish positions for the next rate hike to be appropriate in short coming months if the economy continues to improve. The Federal Reserve raised interest rate for the first time in almost a decade in last December, but rates have been remained on hold due to concerns over sluggish inflations. It is widely expected that the rate hike is unlikely to be proceeded ahead of the presidential election in central bank’s next meeting in November. Investors are currently pricing 64% probability of a rate hike at the December meeting. The dollar gained 0.56% at 98.08 closing Friday, rising 1.4% for the week.
The British pound continued staying on the back food as investors continued to weigh on a ‘hard Brexit’ prospect. Sterling has been on a downward spiral with growing concerns that Britain would opt for a hard exit from the European Union. The currency has lost more than 17% against the U.S. counterpart so far this year. GBP/USD traded at 1.2186, down 0.55% for the day and down 2% for the week, following previous week’s 4% fall. Meanwhile, the euro weakened against the greenback with EUR/USD down 0.78% at 1.0971. Investors will be looking ahead to the European Central Bank’s post monetary policy meeting press conference on Thursday to indicate whether the bank will expand its stimulus measure in the wake of sluggish inflation.
Japanese yen held lower on Monday in Asia with remarks from the Bank of Japan Governor on economic growth and inflation. BoJ Governor Haruhiko Kuroda said Monday the economy is on a moderate expanding trend with core consumer prices slightly negative, adding that the central bank will take further action to support growth if necessary. USD/JPY changed hands on Monday at 104.23, up 0.07%. Meanwhile, AUD/USD traded at 0.7597, down 0.26% and NZD/USD traded at 0.7111, up 0.34%.
In the week ahead, investors will be focusing on the European Central Bank’s press conference following the monetary policy meeting on Thursday. Market participants will also be looking ahead to China’s third quarter growth data, amid broad expectations that it will ease further.
Weekly Events and Forecasts
Ahead of the coming week, Solforex has compiled a list of these and other significant events likely to affect the markets.
Monday, October 17
Japan is to release data on manufacturing and industrial production.
Euro zone is to report on consumer price inflation.
European Central Bank President Mario Draghi is to speak at an event in Frankfurt.
The U.S. is to publish data on industrial production and New York state manufacturing.
Federal Reserve Vice-Chair Stanley Fischer is to speak at an event in New York.
Tuesday, October 18
Reserve Bank of Australia is to publish minutes of its recent monetary policy meeting.
The RBA Governor Phillip Lowe is to speak in Sydney.
New Zealand is to release data on inflation.
The U.K. is to publish data on consumer prices and retail price inflation.
Canada is to report on manufacturing sales.
The U.S. is to publish data on consumer price inflation and housing market index.
Wednesday, October 19
China is to release data on industrial production, retail sales, and third quarter GDP growth.
Japan is to produce data on industrial activity.
The U.K. is to report on employment.
Euro zone is to publish data construction activity.
The U.S. is to release data on building permits and housing start followed by the beige book announcement.
Thursday, October 20
Australia is to release its employment report as well as business confidence report.
Japan is to publish data on machinery orders.
Germany is to report on producer price inflation.
Euro zone is to release data on current account.
The ECB is to announce its benchmark rate and publish its rate statement followed by a press conference.
The U.K. is to produce data on retail sales.
The U.S. is to report on its weekly initial jobless claims and existing home sales.
Friday, October 21
China is to release its property market index.
Euro zone is to publish data on consumer sentiment.
The U.K. is to report on public sector borrowing.
Canada is to produce data on retail sales and inflation.
The above schedule may change*