Weekly Market Outlook

Fed minutes, NZD inflation and UK jobs report

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Some important events mark the economic data for the week ahead. This comes amid a slow calendar week last week.

The Fed will be releasing its meeting minutes this week. A busy schedule for the USD will also see the retail sales, the Empire State Manufacturing index and housing data that cover both building permits and housing starts.

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New Zealand will be reporting on its quarterly inflation. Economists forecast consumer prices to jump 0.7%on the month. This marks a steady pace of increase and is expected to push the annual inflation rate by 1.7%, up from 1.5% in the second quarter.

Data from the Eurozone will see the German inflation figures coming out. Germany’s monthly inflation rate is expected to rise 0.4%. Forward-looking indicators will cover the economic sentiment that could give a glimpse into the future economic activity.

The Eurozone’s inflation report will also be coming out. Data suggests that consumer prices in the Eurozone advanced 0.5% on the month. However, on a yearly basis, the headline CPI is expected to rise 2.1%, marking a slight increase from 2.0% in the twelve months ending August 2018.

Here’s a quick recap of the leading economic events due this week.

GBP to focus on inflation and labor market data

A busy week for the GBP is in store as investors await fresh economic details. This week, the UK’s Office for National Statistics will be releasing the inflation figures for September and the labor market details.

Headline inflation for the United Kingdom is expected to rise 0.3% on the month on a month over month basis for September. This is supposed to bring the annual inflation rate to 2.6% for the twelve months ending September. The forecasts signal a slightly slower pace of build up in price pressures. In August, the UK’s headline CPI gained 2.7%.

Core inflation rate which strips the volatile food and energy prices are forecast to rise 2% on the year. Once again, core CPI is also expected to ease with the twelve months ending August showing a 2.1% increase on the year.

Ahead of the inflation report, the monthly labor market report will be released. The UK’s unemployment rate is expected to hold steady at 4.0%, unchanged from the data released in the previous month. Investors will, of course, be focused on the wage growth aspect.

Excluding bonuses, wages in the UK are forecast to rise to 2.9%. This marks the same pace of increase compared to the previous month’s data. Including bonuses, wage growth is expected to rise to 2.6%, also marking a same pace of improvement compared to the last month’s data.

If inflation indeed slows, this could be a welcome change as wage growth starts to rise at a faster pace compared to inflation. The outcome of this week’s economic data from the UK is unlikely to alter the course of the monetary policy action from the Bank of England.

Later in the week, the week, the retail sales report is expected to show a 0.4% decline on a month over month basis, excluding gasoline. Headline retail sales are expected to rise at an annualized pace of 3.6%, advancing from the 3.3% increase seen in the twelve months ending August.

Fed minutes and U.S. retail sales

The week ahead will be somewhat busy as far as the U.S. dollar is concerned. The big-ticket item will, of course, be the Fed’s meeting minutes. The minutes cover the Federal Reserve meeting from September where officials voted unanimously to hike interest rates by 25 basis points.

The minutes will reveal the deliberations among Fed officials.

On the economic front, data this week will cover the retail sales report. Economists forecast that consumer spending fuelled retail sales to rise 0.7% on the month in September. This marks a huge jump compared to the 0.1% increase registered in August.

Excluding auto sales, retail sales are expected to advance 0.4% in September, expanding on the 0.3% increase seen in August. The remainder of the week will see various reports including the building permits data.

Activity is expected to show a modest increase in building permits, rising to 1.28 million in the month. In August, building permits rose 1.23 million.

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