Last week, the US dollar attempted to correct after a major drop caused by the results of the September US Fed meeting. During the press conference, Fed Chair Jerome Powell hinted that the interest rate may be cut again by the end of the year. He announced last week that two 0.25% cuts before the year’s end would be the best course of action. However, some economists are making bold predictions, suggesting that the interest rate may be slashed by 0.75% or even 1.00% by the end of the year and could continue to decline next year, which is a fundamental bearish factor for the US dollar.
After the release of the US PMIs and September labor market data, market participants will focus on the US September inflation figures next week. They will also analyze the minutes of the September FOMC meeting to discover additional information for their US monetary policy assessment.
Besides, in the upcoming week, 07.10.2024 – 13.10.2024, market participants will pay attention to the publication of macro data on the eurozone, Germany, Canada, and the US. The US September inflation data is expected to draw significant attention.
Note: During the coming week, new events may be added to the calendar, and / or some scheduled events may be cancelled. GMT time
The article covers the following subjects:
Key facts
- Monday: Eurozone retail sales data.
- Tuesday: Reserve Bank of Australia meeting minutes.
- Wednesday: Reserve Bank of New Zealand meeting, FOMC meeting minutes.
- Thursday: US CPI.
- Friday: Canada’s labor market data, US PPI.
- Key event of the week: US inflation data.
Monday, October 07
09:00 – EUR: Eurozone Retail Sales
Retail sales data is the main measure of consumer spending, indicating the change in the sales volume. A high indicator result strengthens the euro, while a low one weakens it.
Previous values: +0.1% (-0.1% YoY), -0.3% (-0.3% YoY), +0.1% (+0.3% YoY), -0.5% (0% YoY), +0.8% (+0.7% YoY), -0.5% (-0.7% YoY), +0.1% (-1.0% YoY) in January 2024, -1.1% (-0.8% YoY) in December, -0.3% (-1.1% YoY) in November, +0.1% (-1.2% YoY) in October, -0.3% (-2.9% YoY) in Sept, 1.2% (-2.1% YoY) in August, -0.2% (-1.0% YoY) in July, -0.3% (-1.4% YoY) in June, 0% (-2.4% YoY) in May, -1.2% (-2.9% YoY) in April, -0.8% (-3.3% YoY) in March, +0.3% (-2.4% YoY) in February, -2.7% (-1.8% YoY) in January, +0.8% (-2.8% YoY) in December 2022.
The data suggests that retail sales have not returned to pre-pandemic levels after a severe drop in March–April 2020, when Europe was under strict quarantine measures, and are periodically declining again. Nevertheless, values exceeding the forecast will strengthen the euro.
Tuesday, October 08
00:30 – AUD: Reserve Bank of Australia Meeting Minutes
The document is published two weeks after the meeting and the interest rate decision. If the RBA is optimistic about the country’s labor market and GDP growth rate and is hawkish on the inflation outlook, the rate may be increased at the next meeting, which is favorable for the Australian dollar. The bank’s dovish rhetoric on inflation, in particular, is putting pressure on the Australian dollar.
During the recent September 2024 meeting, the RBA paused again, keeping the interest rate at a 12-year high of 4.35%. However, the RBA signaled the possibility of a further increase if inflation starts to accelerate.
At the press conference after the meeting, Reserve Bank of Australia Governor Michele Bullock stated that “rates will remain on hold for the time being.” Bullock mentioned that “Inflation is still above our target, and it’s proving to be sticky.” Besides, inflation is “above the midpoint of the 2%–3% target range”, and the Reserve Bank Board suggests that “in the near term, it does not see interest rate cuts.”
Therefore, the RBA remains almost the only major central bank in the world that has explicitly stated that it will maintain tight monetary policy parameters.
If the released minutes contain unexpected information regarding the RBA monetary policy issues, the volatility in the Australian dollar will increase.
Wednesday, October 09
01:00 – NZD: New Zealand Reserve Bank’s Interest Rate Decision. Accompanying Statement
After its meetings in October and November 2021, the Reserve Bank of New Zealand raised its key interest rate to 0.50% for the first time in seven years and then to 0.75%. In February and April 2022, the interest rate was increased again to 1.5% to ease inflation and curb swiftly escalating house prices. Currently, the RBNZ interest rate is at 5.50%.
The regulator previously stated that the economy no longer needed the current level of monetary stimulus.
The RBNZ cut the official monetary rate by 0.25% to 5.25% in August 2024 after eight consecutive meetings where the RBNZ held the rate unchanged.
The New Zealand currency faced pressure following the unexpected RBNZ ‘s announcement to reduce the interest rate from 5.50% to 5.25%. The accompanying statement revealed that the decision was made amid expectations of a further decline in inflation, which is gradually returning to the target range of 1.0%–3.0%.
In July, the Stats NZ released the official consumer price index values. Inflation slowed to +0.4% in Q2 2024 against +0.6% in Q1 and to +3.3% YoY against +4.0% in the prior quarter.
Inflation expectations have also lowered. Two-year inflation expectations have fallen from 2.33% in Q2 2024 to 2.03% in Q3, and the average one-year inflation expectations have dropped to 2.40% in Q3 against 2.73% in the prior quarter.
During this meeting, the RBNZ might decide to either reduce the interest rate once again, express support for further monetary policy easing, or keep the rate unchanged. Market participants monitoring the New Zealand dollar quotes should be prepared for a sharp increase in volatility during this period.
In the accompanying statement and commentary, the RBNZ officials will explain the interest rate decision and the economic factors that influenced it.
The New Zealand dollar quotes volatility may rise sharply this time.
Notably, the New Zealand central bank policymakers kept the interest rate at 5.50% after the July 2023 meeting. This marked the first time the RBNZ had halted the tightening of monetary policy since it began in August 2021. The RBNZ noted that the current monetary policy stance is already restrictive in the accompanying statement.
18:00 – USD: Federal Open Market Committee Meeting Minutes
The FOMC minutes release is extremely important for determining the course of the Fed’s current policy and the prospects for US interest rate hikes. Volatility in financial markets usually increases during the minutes publication, as they often reveal changes or provide clarifications from the latest FOMC meeting.
Following the September 18, 2024 meeting central bank governors decided to reduce the federal funds rate by 0.50% to 5.00% and indicated a leaning towards further monetary policy easing to bolster the labor market.
Meanwhile, markets are expecting two more interest rate cuts this year.
The dovish tone of the minutes will positively impact stock indices and negatively affect the US dollar. The hawkish Fed’s rhetoric on the monetary policy may boost the US dollar.
Thursday, October 10
12:30 – USD: Consumer Price Indexes
The Consumer Price Index (CPI) measures the change in prices of a selected basket of goods and services over a given period and is a key indicator for assessing inflation and changes in consumer preferences. Food and energy are excluded from the Core CPI to provide a more accurate assessment.
A high index reading strengthens the US dollar because the probability of a Fed interest rate hike increases, while a low reading weakens the currency.
Previous values YoY:
- CPI: +2,5%, +2.9%, +3.0%, +3.3%, +3.4%, +3.5%, +3.2%, +3.1%, +3.4%, +3.1% +3.2%, +3.7%, +3.7%, +3.2%, +3.0%, +4.0%, +4.9%, +5.0%, +6.0%, +6.4% in January 2023;
- Core CPI: +3.2%, +3.2%, +3.3%, +3.4%, +3.6%, +3.8%, +3.8%, +3.9%, +3.9%, +4.0%, +4.0%, +4.1%, +4.3%, +4.7%, +4.8%, +5.3%, +5.5%, +5.6%, +5.5%, +5.6% in January 2023.
The data indicates a continued slowdown in consumer inflation, albeit at a slower pace than anticipated by the Fed. It remains markedly below the 2022 reading when US annual inflation hit a 40-year high of 9.1% in June. On the other hand, US inflation is still significantly above the Fed’s 2% target, which will force US central bank policymakers to keep the interest rate elevated.
If the figures are confirmed or prove to be lower than expected, the US dollar will likely decline in value in the short term. Readings higher than estimated will strengthen the currency, as it will increase the probability of the Fed keeping the interest rate at high levels for longer.
Friday, October 11
06:00 – EUR: German Harmonized Index of Consumer Prices (Final Estimate)
The Harmonized Index of Consumer Prices (HICP) is published by the European Statistics and is calculated using a methodology agreed upon by all EU countries. The HICP is an indicator for measuring inflation and is used by the European Central Bank to assess price stability. A positive index result strengthens the euro, while a negative one weakens it.
Previous values YoY: +2.0%,+2.6%, +2.5%, +2.8%, +2.4%, +2.3%, +2.7%, +3.1% in January 2024, +3.8% in December, +2.3% in November, +3.0% in October, +4.3% in September, +6.4% in August, +6.5% in July, +6.8% in June, +6.3% in May, +7.6% in April, +7.8% in March, +9.3% in February, +9, 2% in January, +9.6% in December, +11.3% in November, +11.6% in October, +10.9% in September, +8.8% in August, +8.5% in July, +8.2% in June, +8.7% in May, +7.8% in April, +7.6% in March, +5.5% in February, +5.1% in January 2022.
The data suggests that German inflation continues to decelerate, albeit at a slower pace than expected. This situation is putting pressure on the ECB to ease its monetary policy. Figures lower than the previous reading will likely affect the euro negatively. Conversely, the resumption of inflation growth may provoke the appreciation of the euro. The growth of the indicator values is a positive factor for the currency.
If the September data turns out to be better than previous values, the euro may strengthen in the short term.
The preliminary estimate stood at +1.8%.
12:30 – CAD: Canada Unemployment Rate
Statistics Canada will release the country’s September labor market data. Since 2020, unemployment has risen in Canada. Massive business closures due to the coronavirus and layoffs have also contributed to the unemployment rate, increasing from the usual 5.6%–5.7% to 7.8% in March and 13.7% in May 2020.
In August 2024, unemployment stood at 6.6% against 6.4% in July and June, 6.2% in May, 6.1% in April and March, 5.8% in February, 5.7% in January 2024, 5.8% in December and November 2023, 5.7% in October, 5.5% in September, August, and July, 5.4% in June, 5.2% in May, 5.0% in April, March, February, January, December, 5.1% in November, 5.2% in October and September, 5.4% in August, 4.9% in July and June, 5.1% in May, 5.2% in April, 5.3% in March, 5.5% in February, 6.5% in January 2022.
If the unemployment rate continues to rise, the Canadian dollar will depreciate. If the data exceeds the previous value, the Canadian dollar will strengthen. A decrease in the unemployment rate is a positive factor for the Canadian dollar, while an increase is a negative factor.
12:30 – USD: Producer Price Index
The Producer Price Index (PPI) measures the average change in wholesale prices determined by manufacturers at all stages of production. The index is one of the leading inflation indicators in the United States, estimating the average change in wholesale producer prices.
Rising production costs increase wholesale selling prices, which ultimately boosts inflation. In normal economic conditions, growing inflation usually puts upward pressure on the national currency quotes, implying a tighter central bank monetary policy.
Previous values: +0.2% (+1.7% YoY) in August, +0.1% (+2.2% YoY) in July, +0.2% (+2.6% YoY) in June, -0.2% (+2.2% YoY) in May, +0.5% (+2.2% YoY) in April, +0.2% (+1,6% YoY) in March, +0.6% (+1.6% YoY) in February, +0.3% (+0.9% YoY) in January 2024, 0% (+0.9% YoY) in December 2023, -0.5% (+1.3% YoY), +0.5% (+2.2% YoY), +0.7% (+1.6% YoY), +0.3% (+0.8% YoY), +0.1% (+0.2% YoY), -0.3% (+0,9% YoY), +0.2% (+2.3% YoY), -0.5% (+2.7% YoY), -0.1% (+4.9% YoY), +0.7% (+5.7% YoY) in January 2023.
If the data exceeds the forecasted value, the US dollar will likely strengthen. Conversely, if the data falls below forecasted and previous values, this will exert pressure on the Fed. This could lead to the Fed’s monetary policy easing, which will negatively impact the US dollar.
14:00 – USD: University of Michigan Consumer Sentiment Index (Preliminary Release)
This indicator reflects American consumers’ confidence in the country’s economic development. A high reading indicates economic growth, while a low one points to stagnation. Previous indicator values: 70.1 in September, 67.9 in August, 66.4 in July, 68.2 in June, 69.1 in May, 77.2 in April, 79.4 in March, 76.9 in February, 79.0 in January 2024, 69.7 in December 2023, 61.3 in November, 63.8 in October, 68.1 in September, 69.5 in August, 71.6 in July, 64.4 in June, 59.2 in May, 63,5 in April, 62.0 in March, 67.0 in February, 64.9 in January 2023, 59.7 in December, 56.8 in November, 59.9 in October, 58.6 in September, 58.2 in August, 51.5 in July, 50.0 in June, 58.4 in May, 65.2 in April, 59.4 in March, 62.8 in February, 67.2 in January 2022. An increase in the indicator will strengthen the US dollar, while a decrease will weaken the currency. The data shows that the recovery of this indicator is uneven, which is unfavorable for the greenback. A decline below previous values will likely negatively impact the US dollar in the near term.
Price chart of NZDUSD in real time mode
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