FX Week Ahead: Inflation and GDP reports

Nov 13, 9:17 am
Uk inflation_BoE_2003

Inflation and GDP data will be the main dominating themes this coming week. Data from the Eurozone, Canada, the United States, the UK, and Sweden will show the overall inflationary trends during the month of October.

The inflation data is also likely to influence some of the monetary policy decisions due in December. However, consumer prices are expected to remain broadly stable compared to the previous month.

GDP reports are also coming out next week. The Eurozone will be releasing its second GDP estimates. No changes are expected as the Eurozone annual GDP growth rate is expected to remain unchanged at 2.5% in the quarter ending September.

The GDP from Japan is however expected to show a weakening in the economic activity. Still, the declines in the GDP are only expected to remain moderate following a better than expected increase in the previous quarter.

Here’s a quick recap into this week’s economic calendar for the currency markets.

Inflation and GDP reports to dominate the markets this week

Inflation data is expected to be released across some of the major G7 economies this week. The consumer prices data will likely confirm whether inflationary pressures are returning the weakness in consumer prices will persist.

UK Consumer Price Index (Annual CPI). Source: Tradingeconomics.com
UK Consumer Price Index (Annual CPI). Source: Tradingeconomics.com

In the Eurozone, the final inflation figures are expected to show no change. This confirms the decline in the pace of increase. Consumer prices rose 1.4% on the headline and 0.9% on the core according to the flash estimates released a few weeks before. This would mark a slowdown in inflation following the previous months of steady increase.

The Eurozone’s second revised GDP estimates are also coming up this week. Following the initial estimates that showed a 0.5% quarterly increase, no revisions are expected. This leaves the Eurozone economic activity rising 2.5% on the year during the third quarter.

In the US the inflation data is forecast to show another slower pace of increase in consumer prices. Headline CPI is forecast to rise just 0.1% on the month in October.

This follows September’s increase of 0.5%. Core CPI is expected to rise slightly at the pace of 0.2%, up from 0.1% previously. On a year over year basis, inflation in the US is expected to show a 2% increase in October while core CPI is forecast to rise 1.7%, rising at the same pace as the month before.

Japan’s GDP estimates are also coming out this week, and initial estimates forecast a weaker pace of economic expansion in the third quarter.

GBP to stay busy with inflation, unemployment, and retail sales figures

The British pound is expected to remain busy throughout the week as important economic indicators that the Bank of England will likely be monitoring are expected to be released.

According to the economists polled, the inflation rate in the UK is set to maintain its momentum with forecasts showing that headline consumer prices might have increased 3.2% at an annual rate in October. This comes after September’s inflation data showed a 3.0% increase. However, with the Bank of England hiking interest rates earlier in November, consumer prices are expected to ease. Core CPI data is also forecast to rise 2.9%, accelerating from the previous month on a year over year basis.

On Wednesday, the labor market data will be coming out. As keeping with the trend, wage growth is expected to remain muted. Average earnings including bonuses are expected to rise 2.2%, keeping a steady pace. However, with inflation outpacing wage growth, the pressure on households is expected to remain. The UK’s unemployment rate is expected to remain unchanged at 4.3%.

Retail sales data due on Thursday will show a moderate rebound according to the estimates. Core retail sales excluding gasoline are expected to rise 0.1% on the month. On a year over year basis, headline retail sales are expected to show a decline of 0.6%. This comes after retail sales grew at a slower pace of 1.2% previously.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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