USD: Up to its highest levels since March, and climbing…
The US dollar kept rising last week as jobless claims continued to fall with a tightening labor market, and as September’s retail sales and producer inflation grew slightly faster than analysts expected. A string of positive labor market reports has made investors more optimistic that the Federal Reserve will raise interest rates before the end of this year, which continues to fuel the dollar’s rise.
The greenback is stumbling into this week, however, as October’s New York Manufacturing Index showed much worse-than-expected business conditions for New York manufacturers. Tuesday morning will bring consumer inflation growth data, while Wednesday morning will show us September’s housing starts and building permits results, followed by a speech from Federal Reserve member Williams. Weekly jobless claims, the Philadelphia Fed’s manufacturing survey for October, and existing home sales numbers for September will come out on Thursday morning, capping off the week’s major data. With investor optimism still running high for the dollar, perhaps only negative surprises from this week’s data could derail the currency’s gains.
EUR: Will there be any surprises from Thursday’s European Central Bank meeting?
The euro slid for a third straight week against the rising US dollar despite the latest Eurozone data showing continued resilience in across the region. The latest inflation growth readings out of Germany, Italy, and Portugal met or exceeded expectations, while the broader Eurozone’s industrial production results for August were also on par with forecasts.
The shared currency is starting this week off stronger against a sliding US dollar. That said, the euro may resume its slow slide if the US dollar regains its upward momentum, unless any of the Eurozone’s data significantly outperforms expectations this week. Tuesday will be light on data, while Wednesday morning will bring the broader Eurozone’s construction output results for August as well as Portugal’s current account balance (trade-related data). Thursday morning will be important, as Germany’s producer inflation numbers for September will be followed by the European Central Bank’s meeting, where the central bank is expected to keep stimulus levels steady and interest rates at zero. Friday will be light with a Eurozone consumer confidence reading to come out in the morning.
GBP: Hard Brexit details (or lack thereof) continue to drive sterling
The pound continued its plunge into fresh post-Brexit lows last week as the lack of details around next year’s hard Brexit plans continued to plague the currency with uncertainty. Sterling did rally last Wednesday after Prime Minister Theresa May announced that she would allow “a full and transparent” Commons debate before Article 50 (the official Brexit initiation plan) starts early next year, but the currency’s rally didn’t last as uncertainty soon returned.
Sterling continues to fall into this week as investors await a court case ruling on whether or not the government may invoke Article 50 (the Brexit initiation process) without a parliamentary vote. Tuesday morning we’ll see the UK’s retail, housing, and producer inflation growth results for September, while Wednesday morning will bring September’s claimant count rate (jobless claims) and the 3-month average wage growth results. Thursday morning will be light with just September’s retail sales growth numbers, while Friday morning’s latest public sector net borrowing readings will be the last of the significant data for the week. As with last week, the pound’s movement may continue to be tied to new information and details around next year’s hard Brexit plans unless the latest economic data surprises investors.
CAD and AUD: Awaiting Bank of Canada and China results out this week
The Canadian dollar traded choppy last week as oil prices hovered around $50 per barrel and as housing market data showed mix results with good housing start numbers and slower-than-expected housing price growth. This week will bring August’s manufacturing shipment growth numbers on Tuesday morning, the Bank of Canada’s interest rate decision on Wednesday morning, and retail sales and consumer inflation data on Friday morning to finish the week. The BoC is expected to hold interest rates steady at 0.5% at its Wednesday meeting, but a surprise interest rate cut could cause the Canadian dollar to weaken. A decline in oil prices could also hurt the currency this week.
The Australian dollar also traded choppy last week despite few data surprises. The Aussie dollar started this week off choppy too as investors awaited Monday evening’s speech from Reserve Bank of Australia Deputy Governor Lowe and September’s new motor vehicle sales results. Tuesday evening will bring economic forecasts for Australia as well as China’s Q3 GDP, industrial production, and retail sales results for September. We’ll see more forecasts from the Conference Board on Wednesday morning, with business confidence and employment data to come out that evening to finish off the week. Weak economic results out of China (Australia’s largest trading partner) could hurt demand for Australia’s exports and cause the Aussie dollar to slide this week.