US inflation and consumption data will be the highlights of the slow week, from the standpoint of economic news, ahead of us. US markets will be closed on Monday due to Columbus Day so liquidity will be lower than usual.

USD 

The employment report disappointed with the headline NFP number coming in at 194k vs 500k as expected. Previous month’s reading was revised up to 366k. The unemployment rate has dropped to 4.8% from 5.2% in August but participation rate ticked down to 61.6% which is particularly concerning as it shows that more and more people are leaving the work force. Wages showed a 0.6% m/m and 4.6% y/y rise giving some positives to the report. The report now opens the question how will Fed proceed further with the planned taper since the theory of people hurling back to work once the school begins did not materialize. Is the report good enough for them to continue with the planned taper, or will they delay it, prolonging it with smaller monthly amounts, $15 bn vs $20bn as expected? Looking at report’s details we see a good deal of positives which leads us to think that taper will proceed as planned.

US Senators have voted 50-48 in favour of new debt bill intended to extend the debt limit until December. With Democrats having a majority in the House, the bill should go unobstructed to President Biden for signing. December is less than two months away, so we will see the similar charade play out in the second part of November. 

This week we will have inflation and consumption data. Inflation is expected to remain stable at the elevated levels while retail sales should continue to grow, however at a slower pace. 

Important news for USD: 

Wednesday:

CPI

Friday:

Retail Sales 

EUR 

Final services PMI for September in the Eurozone were slightly upgraded to 56.4 from 56.2 as preliminary reported. Both German and French readings saw small improvements indicating that demand is slowing at a slower pace than anticipated. Supply shortages are hampering the growth of the economies around Europe. Composite PMI ticked up to 56.2 from 56.1 as preliminary reported. Retail sales in August came in at 0.3% m/m vs 0.8% m/m, thus rebounding less than expected from -2.6% m/m reading in July. August reading leaves concerns about consumption growth in Q3 and with the furlough scheme ending combined with rising energy prices, outlook for consumption in Q4 is less than rosy. 

GBP 

Chancellor of the Exchequer is expected to announce a new jobs initiative intended to replace the furlough program that ended last month. Pound managed to stop last week’s bleeding and GBPUSD profited more than 50 pips on the week. However, rising energy prices and unresolved Brexit issues could lead to a continuation of the downtrend for the pair. 

This week we will have employment data as well as GDP data for the month of August. 

Important news for GBP: 

Tuesday:

Claimant Count Change

Unemployment Rate

Wednesday:

GDP 

AUD 

RBA meeting was a non-event. The rate was left at 0.10% with targeted yield on 3-year government bond also at 0.10%. QE program will continue at a rate of AUD4bn/week until at least mid-February of 2022. Bank members confirmed that conditions for a rate hike will not be met until 2024. They see virus induced setback to be only temporary and expect growth to pick up in Q4, with many firms seeking to hire workers ahead of the expected reopening in October and November. We should get a confirmation of that next week when the new employment report is published. Australia recorded its largest ever trade surplus of AUD15077m in the month of August. Exports of coal and LNG were the biggest contributors and with energy crisis looming it is likely that we will see a growth in value for these exports. 

This week we will have employment data from Australia as well as trade and inflation data from China. 

Important news for AUD: 

Wednesday:

Trade Balance (China)

Thursday:

Employment Change

Unemployment Rate

CPI (China) 

NZD 

RBNZ delivered on its promise and raised the interest rate by 0.25% thus making it the first major central bank to do so. Bank members concluded that it is appropriate to reduce the level of monetary stimulus and that the stimulus will be removed further over time. They see inflation reaching 4% in the near-term but returning toward 2% in the mid-term. Bank’s future moves are contingent on the medium-term outlook for inflation and employment. RBNZ has put itself firmly on the path of a rate hike cycle as many analysts agree that we will see rate hikes at November and most likely February meeting. NZDUSD was propelled up after the announcement but was subsequently dragged down by the overwhelming USD strength. Still, based on the interest rate differential and central bank policies NZD should strengthen in the coming weeks. 

CAD 

September employment report showed employment reaching pre-pandemic levels. Employment change came in at 157k vs 60k as expected. Internal data paint even brighter picture of the report. The unemployment rate fell to 6.9% from 7.1% in August and it was achieved on the back of surging rise in the participation rate (65.5% from 65.1% in August). All of the jobs added were full-time (193.6k) with part-time jobs showing a decline of -36.5k. CAD was already on the strong foot with WTICrude approaching the $80 level and this report will only underpin that strength. BOC will stay on the course to raise interest rates during the next year. 

JPY 

Headline CPI for the Tokyo area in September came in at 0.3% y/y vs -0.4% y/y the previous month. Rising energy prices have managed to push inflation numbers back into positive territory for the first time after July of 2020, but when we exclude energy and fresh food inflation is still negative (-0.1% y/y) and it is at zero or below zero for the sixth consecutive month. BOJ’s target of 2% is still miles away. Labor cash earnings for August came in at 0.7% y/y vs 0.6% y/y in July while household consumption plunged -3% y/y for the same period. 

CHF 

SNB total sight deposits continued to decline and came in for the week ending October 1 at CHF714.2bn vs CHF714.5bn the previous week. Inflation data for September showed headline number at 0.9%y/y, same as in August, vs 1.1% y/y as expected and core at 0.5% y/y, up from 0.4% y/y in August. With headline inflation remaining unchanged SNB is not prompted to take any action. Seasonally adjusted unemployment rate for the month of August ticked down to 2.8% from 2.9% in July indicating tightening of the labour market conditions in Q3.

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Please note that this analysis should not be used as investing advice as it is only an overview of the economic events influencing the markets. Please remember that our accounts have Market Execution. Please note how Execution works during high impact news and other times of low liquidity.