- Inflation reports from the major economies could steer currencies this week
- A set of the British data (CPI and the labor market) seems to be the most worth looking at
- Monday is relatively calm but several central bank speakers are on the agenda
This week is going to be dominated by inflation reports coming from the major economies. As it’s good known this kind of the data is one of the most crucial as far as the currency market is concerned, hence it’s obvious that many currencies in the G10 basket could be exposed to heightened volatility. On top of this we ought to prepared for another leaks related to the US tax plan as it seems to be uninterruptedly the hot topic. Nevertheless Monday is quite calm as there are no readings of note except a few speeches of central banks. Let us come forth with all of them:
- 9:00 pm BST – ECB’s Constancio
- 4:00 pm BST – ECB’s Nowotny
- 5:45 pm BST – BoJ’s Kuroda
- overnight – a set of the Chinese data including industrial production, retail sales and fixed asset investments
What to watch this week beyond Monday?
Last week was mostly about the Tax Plan in the US and this topic will stay hot for some time as differences within the Republican Party make the passage of this legislation uncertain. For that reason both US dollar and equity markets could be on the line. However this week, investors will be focusing on inflation data as well as it plays the vital role in decisions on interest rates.
CPI release in the US (Wednesday, 1:30pm BST): This week if full of macroeconomic releases in the United States. We have retail sales (Wednesday), industrial output (Thursday) and housing data (Friday) on the agenda. However, inflation trumps all these reports easily. Traders are aware that economic conditions in the US are more than solid and they warrant another rate increase this year. However, inflation remains a mystery and may affect FOMC communication for the 2018. The dollar has seen some gains already during this quarter but investors are skeptical when it comes to Fed’s ability to raise rates in 2018 more than once. Affected markets: USDJPY, EURUSD
CPI release (Tuesday, 9:30am BST) and retail sales data in the UK (Thursday, 9:30am BST): The Bank of England has just lifted interest rates for the first time since the Brexit vote. Inflation is the main concern for the Bank so the pound traders will be on their heels on Tuesday. However there are legitimate concerns about fitness of British consumers amid a decline of real incomes so the data on sales could be nearly just as important. Affected markets: GBPUSD, EURGBP
CPI release in Canada (Friday, 1:30pm BST): Canadian dollar was the strongest currency in the third quarter as the Bank of Canada increased interest rates twice during this period. However, recent disappointments in the data (mostly inflation and retail sales) cooled the Bank’s enthusiasm to signal more interest rate increases. If there’s anything that could change this approach soon, it’s the data on consumer inflation. Affected markets: USDCAD