Will Janet Yellen give any hints about US monetary policy in Boston today?
This week ends with a bang in the US - another chance to gauge whether the world’s largest economy is ready for tighter monetary policy. Crucial economic indicators, including September retail sales and the University of Michigan consumer sentiment report, will be accompanied by speeches from the Federal Reserve (Fed) Chairwoman, Janet Yellen, and the Boston Fed President, Eric Rosengren. Janet Yellen is due to talk about “Macroeconomic Research After the Crisis”. Investors will be all ears, hoping that she provides hints on the future direction of the central bank’s monetary policy.
In the UK, construction output declined sharply in August. The Bank of England’s third quarter credit conditions survey report is also out. In the Eurozone, the region’s trade balance data is eagerly awaited.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar this morning, after the just released data showed that Britain’s construction output unexpectedly dropped in August, led by a decline in infrastructure projects. The BoE’s credit conditions survey report indicated that unsecured credit to UK households rose during the third quarter. Next week looks pretty busy for Britain with various economic releases lined up. These will include the UK’s consumer price index, ILO unemployment rate, average earnings, retail sales, CBI industrial trends survey and public sector borrowing data.
Yesterday, Sterling ended higher against the greenback for the second consecutive day. However, it failed to find support against the Euro with the cloud of “Hard Brexit” still looming large. Investors keep on pricing the likelihood that Britain’s government will opt for tough Brexit negotiations which will eventually result in Britain losing the European Union’s single market access.
US Dollar – US Markets
The US Dollar is trading stronger against the Pound and Euro this morning. Market participants will keep a close tab on US advance retail sales and the flash Reuters/Michigan consumer sentiment index, scheduled to be released later in the day. (Advance retail sales in expected to rebound for September, while October’s consumer sentiment index is anticipated to advance). Janet Yellen’s speech, slated later today, will be keenly watched for further insights on the timing of an interest rate rise in the US.
The greenback weakened against its major peers yesterday. Data revealed that the number of Americans filing for new unemployment benefits remained steady in the first week of October, at a 4-decade low, pointing towards sustained strength in the labour market that could pave the way for the US Fed to increase interest rates in December. Further, the nation’s import price index rebounded slightly less than expected on a monthly basis in September.
Euro – European Markets
The shared currency is trading mixed against the greenback and the Pound this morning. Data released earlier in the session showed that Spanish consumer prices came in flat for September. Looking ahead, the Eurozone’s trade balance data for August is up for release shortly with no big change expected. Italy’s CPI is also due today. Taking a peek into next week, the most crucial event will be the European Central Bank’s monetary policy decision - speculation is rife that the central bank is mulling over tweaks and a possible extension of its quantitative easing programme. Apart from this, the Euro region’s CPI and consumer confidence data is also scheduled for release next week.
Yesterday, after briefly dipping below 1.10 mark, the Euro ended higher against the US Dollar. On the data front, Germany’s revised CPI numbers for September came in line with estimates.
Other Currencies – Highlights
The Australian Dollar is trading higher against the greenback this morning, rising for the third consecutive session. The domestic currency has been successful in maintaining its momentum thanks to upbeat economic releases from China, Australia’s largest trading partner. China’s consumer prices picked up and surpassed expectations in September. In further good news, China's long battle with industrial deflation turned a corner last month, after a gauge of prices for factory output turned positive for the first time in nearly 5 years, driven by an increase in commodity prices. Separately, the Reserve Bank of Australia’s (RBA) financial stability review mainly centred around issues in Australia’s housing market.
Yesterday, the Australian Dollar remained surprisingly resilient against the US Dollar, despite disappointing Chinese trade data. China’s trade surplus narrowed in September as exports plummeted during the month. Fading hopes for a Fed interest rate rise had weighed on the greenback.