Ready to trade the second half of the month?
Not before you know which major economies are printing inflation numbers this week!
Before all that, ICYMI, I’ve written a quick recap of the market themes that pushed currency pairs around last week. Check it!
And now for the closely-watched potential market movers this week:
Major Economic Events:
NZ quarterly CPI (Oct 17, 9:45 pm GMT) – New Zealand’s inflation jumped by an annualized rate of 7.3% in Q2 2022. That’s the fastest increase since Q2 1990!
This week, markets expect the quarterly rate to slow down from 1.7% to 1.5% while the annual rate takes enough chill pill to dip to 7.1%.
Keep an eye out for upside surprises, which could convince Reserve Bank of New Zealand (RBNZ) members – who settled on a 50 bps interest rate increase earlier this month – to go ahead with the 75 bps hike that they discussed in their last meeting.
China’s data dump (Oct. 18, 2:00 am GMT) – The world’s second-largest economy will be printing a bunch of output-related data following the opening of the 20th Communist Party Congress!
Quarterly GDP is expected to jump by 3.5% after a 2.6% decline in Q3. This could push its annual rate from 0.4% to a whopping 3.3% uptick.
Industrial production and fixed asset investment are also seen accelerating their growth rates at 4.4% (from 4.2%) and 5.9% (from 5.8%) respectively.
Higher prices and September’s lockdowns are expected to weigh on consumer activity, though. Annual retail sales could slow wayyy down from 5.4% to 3.1% while the unemployment rate could tick higher from 5.3% to 5.4%.
U.K.’s inflation numbers (Oct. 19, 6:00 am GMT) – Can Truss’ government still deliver on its “low-tax, high-wage, high-growth economy” promise? So far, the Brits have only been seeing “high prices” and this week’s CPI release should highlight Truss’ challenges.
Annual inflation is expected to maintain its uber high 9.9% growth while core inflation could come in at 6.4% after a 6.3% print for August.
Faster-than-expected consumer price growth could throw (more) doubts on Truss’ decision to put corporate tax increases back on the table and likely drag GBP lower.
Forex Setup of the Week: GBP/USD
GBP/USD Daily Forex Chart
GBP/USD, which found support from the Bank of England (BOE) expanding the scope of its asset purchases and rumors of Kwarteng’s resignation, is now trading closer to 1.1300 after dropping below 1.0500 last week.
Can GBP sustain its bullish momentum though?
With not a lot of central bank action, the U.K.’s political drama (Netflix’s The Crown doesn’t count) might take center stage this week.
The U.K. is printing its latest inflation numbers which could highlight (one of) the challenges Lis Truss’ government is currently facing.
Higher inflation rate or more leadership instability could knock GBP from its gains last week.
Trend warriors who want to take advantage of GBP/USD trading closer to 2022’s trend line resistance can start scaling in at current levels and target the 1.1000 and 1.0500 areas of interest.
After all, the 100 and 200 SMAs continue to point to a downtrend while Stochastic is still not too far from its overbought levels.
Don’t discount upside surprises, though!
Major U.S. companies including Bank of America, Netflix, Tesla, IBM, and Goldman Sachs are printing their latest earnings reports this week. Upside surprises or rosy guidance could inspire risk-taking and take “riskier” bets like GBP higher against safe-havens like USD.
