This week, investors are gearing up for pivotal insights into the US economy's direction. The spotlight will be on the release of inflation reports and the much-anticipated minutes from the Federal Reserve's recent policy meeting. The Federal Open Market Committee (FOMC) minutes provide clarity on the Fed's monetary policy and hints about potential shifts in US interest rates. Together, these releases will significantly influence expectations leading up to the Fed's next rate decision.
Below, we delve into three of the week's key economic events that could have an impact on your investment strategy.
🇪🇺 ECB President Lagarde's Speech
On Tuesday, October 10 at 15:00 GMT+3, ECB President Lagarde is scheduled to give a speech that market participants will be closely monitoring for potential impacts on the markets. Currently, EUR/USD is navigating the lower ground near the 1.0550 mark during the European trading session. Despite an attempt at recovery, the currency pair has not sustained its upward momentum. The US Dollar is experiencing renewed demand, even in light of dovish expectations from the Fed.
This dynamic is occurring as traders maintain a cautious stance amidst ongoing tensions in the Middle East. As we await President Lagarde's address, both her speech and upcoming comments from Fed speakers are drawing significant attention. They are anticipated to be key drivers for market sentiment and activity.
🇺🇸 US PPI and Core PPI (m/m)
On Wednesday at 15:30 GMT+3, the Bureau of Labor Statistics (BLS) will release the September Producer Price Index (PPI), which tracks inflation from the standpoint of manufacturers and wholesalers. Producer prices are often viewed as a leading indicator of consumer prices, as manufacturers’ costs eventually get passed on to consumers. It's worth noting that this indicator can cause temporary volatility in the US Dollar and indices such as the Dow Jones and SPX500. Last month, the PPI rose by 0.7%, while this month's increase is projected to be just 0.1%.
🇺🇸 FOMC Minutes
On Wednesday, at 21:00 GMT+3, the FOMC Minutes from September's meeting will be released. That particular gathering was seen as a game-changer for financial markets, as traders deduced that the U.S. central bank aims to maintain higher interest rates for an extended period, potentially delaying anticipated rate cuts.
Officials are currently observing how previous rate hikes are affecting the economy, with the goal of achieving the Fed's 2% inflation objective. It's estimated that the full effect of a rate change can take 12 to 18 months. Current market expectations suggest a 25-bps rate cut by July of next year, followed by two more cuts through 2024.
Interestingly, while short-term yields remained consistent, indicating the potential end of the Fed's rate hikes, long-term costs rose due to a growing term premium in the Treasury bond market. This shift indicates increasing market uncertainty, particularly concerning delays in stimulus amidst growing global recession concerns.
🇬🇧 United Kingdom GDP m/m
On Thursday, October 12th, at 9:00 GMT+3, the United Kingdom will release its monthly GDP figures. In the previous month, the reading showed a contraction of -0.5%. The forecast for the upcoming announcement suggests a potential flat growth, with an expected figure of 0.0%. Market participants will be keenly observing the release, as it provides insights into the UK's economic health and potential policy implications.
🇺🇸 CPI and Core CPI (m/m)
On Thursday, at 15:30 GMT+3, the Consumer Price Index (CPI) and Core CPI (m/m) data will be released. The Federal Reserve Bank of Cleveland forecasts that consumer prices have risen by 0.4% in the previous month and 3.7% year-over-year. Core prices, which exclude the often fluctuating food and energy costs, are also anticipated to have increased by 0.4% from August, with a 4.2% surge on a year-over-year basis. Notably, if these projections hold true, it would represent the smallest annual growth since September 2021, indicating a potential easing in inflationary pressures.
That's it for this week! 👋
