As the week progresses, financial markets are preparing for a smattering of key economic data. These indicators would have a profound effect on trading activities across the globe. Consumer Price Index (CPI) rate releases from the United Kingdom, the United States and Japan will take center stage in discussion. Making waves will be retail sales figures from Australia and the UK. Analysts are particularly concerned about the impact these releases may have on general investor sentiment. Coupled with geopolitical tensions and increased economic pressures, the concern is two-fold.
On Friday, the UK will announce CPI inflation for September. This month it’ll be announcing the retail sales figures for that month. This data comes at a very important time for the UK economy. Given today’s report of high inflation paired with a still-gloomy GDP growth as of August, this scenario isn’t that far-fetched. Market participants are keenly aware that the Bank of England (BoE) faces mounting pressure not to ease its monetary policy in light of these challenges.
In the United States, the CPI rates scheduled for release on Friday are similarly being watched very carefully. Together, these figures will give us a clearer picture of inflation going into the Federal Reserve’s next full policy meeting. Meanwhile on the same day, Japan will announce its CPI rates. At the same time, Australia’s retail sales for Q3 could paint an intriguing picture of what consumers were spending on as fortunes shifted across this critical period.
Economic Indicators and Their Implications
The next flood of economic indicators will have a serious hand in steering market flows. Analysts expect increased focus on the UK’s CPI figures, due to the economic turmoil the country is presently weathering.
“In the coming week we note the market’s worries for the UK economic outlook weighing on the pound should they intensify. On a macro level, the release of UK CPI rates for September could get substantial attention by pound traders and a possible acceleration could support the sterling.” – Analyst’s opinion (GBP)
The UK’s labor market has softened more in August, which should temper worries over wage inflation and consumer spending. The International Monetary Fund (IMF) recently issued warnings regarding inflationary pressures in the UK economy, emphasizing the importance of these upcoming data releases.
The United States has its own unique challenges with CPI data potentially showing signs of persistent inflation. Analysts insist that any surprise would go a long way to shape the Federal Reserve’s policy trajectory – and then some.
“Overall, we see the case for the USD to wobble in the coming week with focus being placed on fundamentals. A possible prolongment of the US shutdown, further escalation of the US-Sino trade war and an intensification of the market’s dovish expectations for the Fed’s intentions are all factors that could weigh on the greenback.” – Analyst’s opinion (USD)
Back in Japan, Finance Minister Katsunobu Katō is on alert for excessive foreign exchange volatility. The markets are clearly watching for CPI data that will inform Fed monetary policy shifts.
Global Economic Landscape
While markets worldwide await these important data releases with bated breath, they are on the back foot, hobbled by persistent geopolitical risk. Tariffs, particularly those stemming from the ongoing US-Sino trade relationship, remain the number one concern for traders.
“The key issue for Aussie traders in the coming week are to be the tensions in the US-Sino relationships. Should the tensions escalate further we may see them weighing on the Aussie and vice versa.” – Analyst’s opinion (AUD)
This month’s Australia retail sales figures are of particular significance as they could be a sign of consumer confidence in the face of global uncertainties. With the country’s economy so dependent on positive improvement in China, US-Sino relations will be the center of attention for traders.
In Europe, France’s services PMI figure will be released alongside Germany’s manufacturing sector data, which is currently under pressure. A brighter set of economic data will help to boost the Euro, analysts argue. This at a moment when political conditions in France have begun to settle.
“In the coming week we may see the release of the preliminary October PMI figures shaking the single currency with a possible improvement of economic activity providing some support. Also should we see more stability in the French political scene we may see the EUR being supported as could hopes for a possible ceasefire in Ukraine support the common currency.” – Analyst’s opinion
…as investors keep a close eye on the Euro Zone’s Composite PMI indicator for October. These new data could provide unprecedented insights into current economic trends.
Central Banks and Monetary Policies
Through this delicate balancing act, central banks will continue to be instrumental in driving market expectations on the future course of interest rates. The BoE is under extreme political pressure not to ease monetary policy as inflationary expectations rise and the economy remains weak.
In Japan, policymakers from the Bank of Japan (BoJ) are scheduled to make statements next week that could provide direction for investors. Analysts believe that a more hawkish rhetoric from BoJ officials could help strengthen markets’ confidence in JPY.
“In the coming week we highlight the election process for the new PM next Tuesday and a possible election of Ms. Takaichi could weigh on the JPY. On a monetary level, a possible hawkish tone by BoJ policymakers could provide support for the JPY as could a possible acceleration of Japan’s September CPI rates.” – Analyst’s opinion (JPY)
Global markets are getting ready to widely conflicting economic outlooks and policy prescriptions. Traders are anxiously anticipating the effects that these indicators will have as to central banks’ policy measures and economic prospects in each region.