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With the opening of the first trading day of the month, the dollar resumed its growth. The dollar then received support from positive manufacturing PMI data from S&P Global and the Institute for Supply Management (ISM), and additional support from the fact that congressmen were able to reach a consensus over the weekend on funding the government (for 45 days), and members of the Senate and House of Representatives can continue budget negotiations.

Meanwhile, market expectations regarding the prospects for the Fed policy and the US dollar remain the same. Market participants expect the Fed to raise interest rates by 0.25% by the end of this year and keep it at high levels next year.

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This is a fundamental bullish factor for the USD.

The next week (09.10.2023 – 15.10.2023) will not be particularly rich in important publications of macro statistical data.

However, market participants will pay attention to important macro statistics from Germany, the US, and China.

* during the coming week, new events may be added to the calendar and / or some scheduled events may be cancelled.

** GMT time

Monday, October9

Japan, the US, and Canada celebrate national holidays. Banks and exchanges will be closed, which will affect trading volumes. There are no important macro statistics to be published on this day.

Tuesday, October 10

There are no important macro statistics to be published on this day. However, traders might want to pay attention to the publication (at 09:30 GMT) of the minutes of the September meeting of the Bank of England and the report of the Bank’s Financial Policy Committee with details and information regarding conditions in the financial sector and decisions relating to financial stability issues. The publication of this information may cause increased volatility in the British pound quotes.

Wednesday, October 11

06:00 EUR Harmonized Index of Consumer Prices (HICP) in Germany (final release)

This index is published by the EU Statistics Office and is calculated on the basis of statistical method agreed between all EU countries. It is an indicator for assessing inflation and is used by the Governing Council of the ECB to assess the level of price stability. A positive result strengthens the EUR, a negative result weakens it.

Previous indicator values: +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 (annualized).

If the data for September turns out to be better than previous values, the euro may strengthen in the short term. The growth of the indicator is a positive factor for the euro. The data suggests increasing inflationary pressures in Germany, which in turn puts pressure on the ECB to tighten its monetary policy. Data worse than the previous value will have a negative impact on the euro.

Forecast for September (annualized): +4.3% (preliminary estimate was +4.3%).

12:30 USD Producer Price Index (PPI)

Producer Price Index estimates the average change in wholesale prices determined by manufacturers at all stages of production. It is one of the leading measures of inflation in the United States measuring the average change in wholesale producer prices.

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As rising production costs increase wholesale prices, this ultimately increases consumer inflation. An increase in inflation (in normal economic conditions) usually puts upward pressure on the quotes of the national currency, since it implies a tighter monetary policy of the Central Bank.

Previous values: +0.7% (+1.6% annualized), +0.3% (+0.8% annualized), +0.1% (+0.2% annualized) , -0.3% (+0.9% annualized), +0.2% (+2.3% annualized), -0.5% (+2.7% annualized), – 0.1% (+4.9% annualized), +0.7% (+5.7% annualized) in January 2023.

If the data turns out to be better than expected (above forecast values), the dollar is likely to strengthen. And, conversely, data below the forecast and previous values will put less pressure on the Fed when it makes its next decision to tighten monetary policy, which will have a negative impact on the dollar.

18:00 USD Minutes of the last meeting of the Federal Open Market Committee

The publication of the minutes is extremely important for determining the course of the current Fed policy and the prospects for raising interest rates in the United States. The volatility of trading in financial markets during the publication of the minutes usually increases, since the text of the minutes often contains either changes or clarifying details regarding the results of the last FOMC meeting of the Federal Reserve.

Following the meeting that ended in September 2023, central bank leaders left the interest rate at the current level of 5.50% as expected, but announced the possibility of further tightening monetary policy.

Economists and market participants are now assessing how the Fed will act regarding inflation, which reached 40-year highs in June 2022 but has since begun to decline. Many of them believe that by the end of the year the Fed will move to lower interest rates.

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A soft tone of the minutes will have a positive impact on stock indices and a negative impact on the US dollar. Tough rhetoric from the Fed officials regarding the outlook for monetary policy will push the dollar to further growth.

Thursday, October 12

11:30 EUR Account of the ECB meeting on monetary policy

This document contains an overview of the current ECB policy with planned changes in the financial and monetary areas. The publication of this document may cause a surge in volatility in trading in the euro and on the European stock market.

Investors will be scrutinizing the minutes of the ECB’s September meeting for further signals on the outlook for monetary policy.

Volatility in euro trading could rise sharply if the minutes contain unexpected statements or new information regarding the outlook for monetary policy.

12:30 USD Consumer price indices

Consumer Price Index determines the change in prices of a selected basket of goods and services for a given period and is a key indicator for assessing inflation and changes in consumer preferences. Food and energy are excluded from Core CPI to provide a more accurate estimate.

A high result strengthens the US dollar because the likelihood of a Fed rate hike increases, while a low result weakens it.

Previous values (annualized):

  •      CPI: +3.7%, +3.2%, +3.0%, +4.0%, +4.9%, +5.0%, +6.0%, +6.4% ( in January 2023),
  •      Core CPI: +4.3%, +4.7%, +4.8%, +5.3%, +5.5%, +5.6%, +5.5%, +5.6% (in January 2023)

The data shows a rebound in consumer inflation after rising strongly in the earlier months of 2022, when annual U.S. inflation hit a 40-year high of 9.1% in June.

If the data turns out to be weaker than expected, the dollar will most likely react with a short-term decline. Data stronger than expected will strengthen the dollar, as it will increase the likelihood of the Fed maintaining interest rates at high levels or raising them further.

Friday, October 13

01:30 CNY Consumer Price Index (CPI)

The National Bureau of Statistics of China will present regular monthly data reflecting the dynamics of consumer prices in China. Rising consumer prices could trigger an acceleration in inflation, which could force the People’s Bank of China to take measures aimed at tightening fiscal policy. Increased growth in consumer inflation may cause the yuan to appreciate, and a weak result will put pressure on the yuan.

China’s economy is the second largest in the world after the US. Therefore, the publication of important macroeconomic indicators of this country has a noticeable impact on global financial markets, primarily on the positions of the yuan, other Asian currencies, the dollar, commodity currencies, as well as on Chinese and Asian stock indices. China is the largest buyer of raw materials and a supplier of a wide range of finished products to the global commodity market.

In August 2023, the value of the consumer inflation index was +0.3% (+0.1% in annual terms), in June -0.2% (0% in annual terms), in May -0.2% (+0 .2% in annual terms).

An increase in the consumer inflation index will have a positive effect on the quotations of the yuan, as well as commodity currencies. However, worse-than-forecasted data and a relative decline in CPI may have a negative impact on them. This applies to a greater extent to the Australian dollar, since China is Australia’s largest trade and economic partner.

Forecast for September: +0.3% (+0.2% in annual terms).

14:00 USD University of Michigan Consumer Confidence Index (preliminary release)

This indicator reflects the confidence of the US consumers in the country’s economic development. A high level indicates economic growth, while a low level indicates stagnation. Previous indicator values: 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 USD, and a decrease in the value will weaken the dollar. Data indicate an uneven recovery of this indicator, which is negative for the USD. Data worse than previous values may have a negative impact on the dollar in the short term.

Forecast for October: 68.0.

Price chart of EURUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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