Global Economic Outlook and Analysis.

This week presents a busy schedule of data releases from around the world. It all begins with an update on the Euro Area’s balance of trade and a speech by the Bank of England’s Governor. Later in the week, we can expect to see data on US Retail Sales, UK Employment, UK Consumer Price Index (CPI), and US Building Permits. These data releases are essential for gaining insights into the short-term prospects of each respective currency.

USD/Dollar: The US dollar, though slightly retreating in Asian trading on Monday, remains at higher levels due to escalating tensions in the Middle East. Investors are eagerly awaiting insights into the future of US interest rates from a speech by Federal Reserve Chair Jerome Powell later in the week. The dollar is maintaining its strength against the euro and sterling, as market sentiment remains uncertain. There’s growing anticipation of a potential rate hike by the Federal Reserve towards the end of the year, driven by higher inflation expectations and strong inflation data from last week. The University of Michigan’s one-year inflation expectations surged from 3.2% to 3.8%, and the five-year inflation estimates increased from 2.8% to 3%. Meanwhile, the US Michigan Consumer Sentiment Index data dropped to 63.0 on Friday, falling short of the expected 67.4 and compared to the previous 68.1.

EUR/Euro: The euro weakened recently against the US dollar as geopolitical tensions in the Middle East boosted the dollar’s appeal as a safe haven. If this trend continues, the euro may face further downward pressure. Signs of persistent inflationary pressures in the US, as indicated by the CPI and Michigan consumer sentiment data, are bolstering the dollar. While the likelihood of an interest rate hike in the upcoming November meeting is low, there could be downstream effects, especially if crude oil prices continue to rise.

GBP/Sterling: During the Asian session on Monday, the GBP/USD pair gained momentum, reaching levels above the mid-1.2100s. The softer US dollar is providing some support to the pair. Market sentiment is currently being influenced by the impending release of key data on UK employment and US Retail Sales. The major currency pair is trading around 1.2160, reflecting a 0.15% increase for the day. Over the weekend, Bank of England (BoE) Governor Andrew Bailey, during his remarks at the International Monetary Fund meetings in Morocco, mentioned that rising borrowing costs were impacting the housing market and employment. He suggested that interest rates are likely to stay around the current 5.25% to address the need for a restrictive policy to bring inflation back to the target of 2%.

Economic Calendar