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Inflation And Job Stats To Propel This Week’s Market Moves

With latest ISM PMIs failing to portray strength of US economy, concerns of September Fed-rate hike faded during last week, which in-turn dragged the US Dollar Index (I.USDX) down for the first time in three weeks. The same helped rest of the major currencies to strengthen against the US Dollar; however, the GBP witnessed downside moves on disappointing Manufacturing Production and absence of optimism during Inflation Report Hearings. Further, the EUR enjoyed upbeat comments from ECB President Draghi when he avoided extending present QE while the JPY remained firm as uncertainty over Fed's rate-hike, coupled with divided views of BoJ policymakers over the upcoming monetary policy meeting, favored the Japanese currency's demand. Additionally, AUD and NZD remained firm with upbeat Chinese details while CAD couldn't rise on Crude price advances due to four-month high Canadian Unemployment-rate and neutral tone of the BoC in monetary policy meeting.

During the early-days of present week, Fed Governor Lael Brainard propelled the recent pessimism over September month FOMC meeting and provided additional weakness to the US Dollar while lesser than forecast UK CPI dragged the GBP further towards south. Moving on, five month high Chinese Industrial Production and upbeat Retail Sales helped commodity currencies to halt their latest pullback.

Following the release of UK CPI, headline inflation readings from US and EU, coupled with Australian and UK Job details are likely front-tier figures to grab major market attention. Additionally, US & UK Retail Sales, US Prelim UoM Consumer Sentiment, New-Zealand GDP and monetary policy meetings of the BoE and SNB are some other detail/events that could continue offering liquid market conditions to trader's fraternity. Let's briefly examine them.

US Consumer-Centric Details May Give Clues For September FOMC

Even if latest economics from the US failed to echo optimistic sentiment spread by the Fed Chair during her appearance in Jackson Hole, market players are likely to observe headline Inflation and consumer-centric details, like UoM Consumer Sentiment and Retail Sales, in order to forecast possible actions of the US Federal Reserve in its September 21 meeting.

In its August release, the US Inflation (CPI) marked 0.8% figure against 1.0% forecast while the Core-CPI dipped to 2.2% from 2.3%. As being one of the important components of Fed's agenda, Friday's figures are to be closely examined which bears 1.0% forecast for CPI and 2.2% consensus for the Core CPI. Looking at the monthly details, the CPI might inch-up to 0.1% from 0.0% prior while Core CPI can also improve to 0.2% from 0.1% previous.

Other than Inflation, Thursday's PPI, Retail Sales, Philly Fed & Empire State Manufacturing Indices, followed by Preliminary reading of UoM Consumer Sentiment, scheduled for Friday release, are some other important data-points from US which can help forecast the crucial outcome of the September Federal Reserve monetary policy meeting. Consensus suggests that PPI might flash +0.1% print versus -0.4% prior while the Retail Sales can disappoint traders with -0.1% compared to 0.0% prior but the Core Retail Sale could soothe some of the pain with +0.3% growth against -0.3% prior contraction. Further, the Philly Fed Manufacturing Index is expected to show 1.1 mark against 2.0 prior and the Empire State Manufacturing Index indicates -0.9 stat compared to -4.2 registered in previous month.

To sum up, Inflation being the main component of Fed's policy making factors, an upbeat print could help rejuvenating expectations that the US central banker continue being strong contestant of 2016 rate-hike, which in-turn might favor the greenback in reversing its latest declines.

However, recent data-points haven't been so upbeat for the US and continuation of weaker prints might raise bars for rate-hike during the current year and can drag the USD further towards south.

GBP Traders Shouldn't Miss Top-Tier UK Figures

Alike its US counterpart, the UK is also scheduled for releasing some crucial facts about the health of its economy. The UK CPI, published on Tuesday, was the first in list which remained unchanged at 0.6% and lagged behind 0.7% forecast. Others in the economic-list include, Job details, scheduled for Wednesday, followed by Retail Sales and monetary policy meeting of the Bank of England (BoE), up for Thursday. Forecasts suggest disappointing prints as the Claimant Count Changeis expected to rise to 1.7K against -8.6K prior and the Average Earning is likely softening to 2.1% from 2.4% while the Unemployment Rate might remain unchanged at 4.9%. Moving on, the Retail Sales, core to the UK GDP, is also expected to threaten GBP traders with -0.4% print versus +1.4% previous.

Adding to the aforementioned UK details, monetary policy meeting of the BoE also becomes an important event for the GBP. Even if the meeting isn't likely to alter its present policy framework, the latest signs of economic weakness might tempt MPC members to favor need for additional monetary easing, which in-turn becomes negative for the UK currency's strength.

Hence, while latest UK details have been quite off-beat and weakened the GBP a bit, disappointing numbers of the front-line readings can force the UK central banker to favor the need of additional monetary easing, which in-turn indicates further weakness of the UK currency.

AU Job Details, New-Zealand GDP, SNB And The Rest

While upbeat Chinese readings have already set the stage for extension of commodity currencies' price advance, Australian labor market details, New-Zealand GDP and monetary policy meeting of the Swiss National Bank (SNB) might further help forecast the moves of AUD, NZD and CHF respectively.

Australian Employment Change and Unemployment Rate might not let the AUD traders smile on Thursday as the Employment Change is expected to print 15.2K figure against 26.2K prior while the Unemployment Rate can maintain its 5.7% mark. Further, the New-Zealand GDP, up for release on late Wednesday, can trigger fresh north-run of the NZD with 1.1% growth mark compared to 0.7% prior while the SNB is likely maintaining its current monetary policy intact but a dovish statement considering weakness in Euro area can drag the CHF to south.

The final reading of EU CPI, up for release on Thursday, is the only reading scheduled from Europe which is expected to maintain its 0.2% stage. However, the ECB has recently said that the downside risk to the Inflation has receded and a surprise uptick might provide additional strength to the EUR.

Cheers and Safe Trading,

Anil Panchal