FX Week Ahead – Top 5 Events: UK GDP; FOMC Minutes; US Inflation Rate; China Inflation Rate; US Retail Sales

FX Week Ahead Overview:

• The scope and scale of the UK’s recent economic troubles will be revealed with the release of the August UK GDP report on Wednesday.
• The state of the US economy is in focus this week, with the September US inflation rate and September US retail sales reports due out in the coming days.
• Chinese data this week may help alleviate some concern that the world’s second largest economy is slowing down.

For the full week ahead, please visit the DailyFX Economic Calendar.

10/12 WEDNESDAY | 06:00 GMT | GBP Gross Domestic Product (AUG)

The UK economy continues to backslide as the energy crisis gains steam. According to a Bloomberg News survey, UK GDP contracted by -0.2% in the three-months through August. UK GDP is also expected to come in at 0% m/m from +0.2% m/m, and +2.4% y/y from +2.3% y/y. The recent UK mini-budget may help ward off a steeper setback over the coming months as increased government spending and the potential for reduced tax rates could boost consumption. Nevertheless, with the UK Gilt market in disarray, the Bank of England has a tall task ahead of it to prevent more weakness by the British Pound.

10/12 WEDNESDAY | 18:00 GMT | USD FOMC Meeting Minutes (SEP)

The September FOMC meeting minutes should inspire a modest market reaction when they are released mid-week. However, given the slate of Fed policymakers on the lecture circuit in recent days, and those that are due up in the days ahead, the September FOMC meeting minutes may carry less weight than prior iterations. Nevertheless, considering the September FOMC meeting produced a new Summary of Economic Projections (SEP) that saw a boosted terminal Fed funds rate expectation for 2023, market participants will parse the details for any hints for when the rate hike cycle may finish.

10/13 THURSDAY | 12:30 GMT | USD Inflation Rate (CPI) (SEP)

The upcoming September US inflation report (consumer price index) might offer only scant evidence that peak inflation is in the rearview mirror. According to a Bloomberg News survey, headline US inflation figures are due in at +0.2% m/m from +0.1% m/m and +8.1% y/y from +8.3% y/y, while core readings are expected at +0.5% m/m from +0.6% m/m and +6.5% y/y from +6.3% y/y. Stubborn readings could translate into sustained elevation in Fed rate hike odds, which while good news for the US Dollar, will likely not be the case for US stocks and gold prices.

10/14 FRIDAY | 01:30 GMT | CNY Inflation Rate (CPI) (SEP)

The Chinese government continues to pursue its zero-COVID strategy, which has weighed on growth in a significant manner in recent months. Nevertheless, after monetary easing by the People’s Bank of China and an increase in fiscal support, it appears that the Chinese economy may have regained some steam towards the end of the summer. The headline September Chinese inflation rate (CPI) is due in at +0.4% m/m from -0.1% m/m and +2.8% y/y from +2.5% y/y. The data may help spell reprieve for the Chinese Yuan, which has weakened dramatically in recent months.

10/14 FRIDAY | 12:30 GMT | USD Retail Sales (SEP)

US consumer confidence has rebounded further thanks to US stocks moving off their lows and a further drop in gas prices, a potentially good sign for consumption trends. Nevertheless, US consumers seem to accumulating debt in order to sustain their spending habits. According to a Bloomberg News survey, US retail sales were up by +0.2% m/m in September from +0.3% m/m in August, but the retail sales ex-autos figure is due in at -0.1% m/m from -0.3% m/m. The Atlanta Fed GDPNow growth tracker for 3Q’22 currently sits at +2.9% annualized. In totality, the data shouldn’t prove either helpful or harmful to the US Dollar.

— Written by Christopher Vecchio, CFA, Senior Strategist