FX Week Ahead – Top 5 Events: Japan GDP; Canada & UK Inflation Rates; US Retail Sales; Australia

FX Week Ahead Overview:

  • The coming days will produce a diverse offering of key data releases, with a more global, less US-focused docket.
  • The 3Q’22 Japan GDP report may curtail recent Japanese Yen strength as growth rapidly decelerates.
  • Inflation data from Canada and the UK will underscore how much more work central banks have ahead of them to snuff out price pressures.

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11/14 MONDAY | 23:50 GMT | JPY Gross Domestic Product (3Q)

Typically overlooked, the incoming GDP report for Japan may have renewed focus as traders reassess the Japanese Yen in the wake of its surge at the end of last week. While Federal Reserve rate hike odds have downshifted, dragging down US Treasury yields and thus diminishing the US Dollar’s appeal relative to the Yen, the fact remains that the Bank of Japan is in no such hurry to alter its own highly accommodative monetary policy. Indeed, the 3Q’22 Japan GDP report is expected to show a decelerating growth rate, from +3.5% annualized to +1.1% annualized.

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11/16 WEDNESDAY | 7:00 GMT | GBP Inflation Rate (CPI) (OCT)

Price pressures continue to accelerate in the UK, raising the prospect of stagflation over the coming months as growth rates slow and the labor market weakens. According to a Bloomberg News survey, the October UK inflation report (consumer price index) is due in at a staggering +1.7% m/m from +0.5% m/m and +10.7% y/y from +10.1% y/y, even as the core inflation rate is set to ease slightly to +6.4% y/y from +6.5% y/y. With the Bank of England having already declared that it believes rates markets are too aggressive in their pricing with respect to how high the BOE’s main rate will go, this data mix may once again prove toxic for the British Pound.

11/16 WEDNESDAY | 13:30 GMT | CAD Inflation Rate (CPI) (OCT)

Although the Bank of Canada has already started to slow its pace of rate hikes, incoming price data may provide fresh evidence that more aggressive tightening is necessary. According to a Bloomberg News survey, the October Canada inflation report (consumer price index) is due in at +0.7% m/m from +0.1% m/m and unchanged at +6.9% y/y, while core inflation is expected unchanged at +0.4% m/m and +5.9% y/y from +6% y/y. Rising BOC rate hike odds, coming at a time when Fed hike odds have receded, have been and may remain a tailwind for the Canadian Dollar.

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11/16 WEDNESDAY | 13:30 GMT | USD Retail Sales (OCT)

US consumer confidence is stagnant as gas prices have rebounded and US inflation rates remain stubbornly high, none of which are good signs for consumption trends. But 4Q’22 US GDP appears to be on strong footing, with the Atlanta Fed GDPNow growth tracker at +4% annualized based on the data thus far. Considering the US economy is by-and-large driven by consumption – over 70% of GDP – this portends a US consumer is weathering the storm in the short-term by piling on debt in order to sustain their spending habits. According to a Bloomberg News survey, US retail sales increased by +1% m/m from 0%, and the retail sales ex-autos figure is expected at +0.4% m/m from -0.1% m/m. A resilient US economy may give the Fed more slack to keep raising rates, helping reinvigorate Fed hike odds and support the recently beaten down US Dollar.

11/17 THURSDAY | 00:30 GMT | AUD Employment Change & Unemployment Rate (OCT)

The Australian Dollar has been rallying in recent days after the weaker October US inflation report and news that China may be nearing the offramp of its zero-COVID policy. Incoming Australian labor market figures may help the rally amid signs of a still-strong domestic economy. The October Australia jobs report is expected to show further progress for the labor market, with forecasters anticipating jobs gains of +15K from +0.9K, which should keep the unemployment rate 3.5%.

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— Written by Christopher Vecchio, CFA, Senior Strategist

Read More: FX Week Ahead – Top 5 Events: Japan GDP; Canada & UK Inflation Rates; US Retail Sales; Australia

2022-11-14 14:31:46

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