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  • USD/JPY continues to pullback from the monthly high (109.79) to largely mirror the recent weakness in longer-dated US Treasury yields. Get your market update from @DavidJSong here:https://t.co/fv1jjcufMX https://t.co/RQrkxYSsG7
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Pound May Extend Drop on Claims Data, US Dollar Focused on Fed Outlook

Pound May Extend Drop on Claims Data, US Dollar Focused on Fed Outlook

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Pound May Extend Drop if Soft Jobless Claims Data Undercuts BOE Outlook
  • US Dollar Looks to Retail Sales, PPI and Beige Book for Fed Rate Hike Bets
  • Place Economic Releases Directly on Your Charts with the DailyFX News App

UK Jobless Claims numbers headline the economic calendar in European trading hours. A 35k drop is expected, marking the smallest drawdown in four months. UK news-flow has increasingly underperformed relative to consensus forecasts since mid-September (according to data from Citigroup). Meanwhile, leading surveys suggest the pace of improvement in the labor market has markedly slowed compared with the first half of the year. Collectively, this opens the door for a downside surprise that may further erode BOE rate hike expectations and compound pressure on the British Pound. We remain short GBPUSD.

Later in the day, the spotlight turns to US event risk, where September’s Retail Sales and PPI figures are on tap. Receipts are expected to fall 0.1 percent compared with the prior month, while wholesale inflation is seen holding steady at a year-on-year rate of 1.8 percent. Separately, the Federal Reserve will publish its Beige Book survey of regional economic conditions.

Realized US economic data outcomes have cautiously improved relative to expectations over recent weeks. More of the same this time around coupled with an absence of particularly negative surprises in the Beige Book may reboot Fed rate hike bets, sending the US Dollar higher. Risk-geared currencies like the Australian and New Zealand Dollars may suffer most in such a scenario as the prospect of stimulus withdrawal amplifies already building global slowdown worries.

The Aussie recovered from overnight lows after September’s Chinese CPI data registered softer than economists expected. The benchmark year-on-year inflation rate slowed to 1.6 percent, coming in below forecasts calling for a 1.7 percent result and marking the weakest price growth in close to five years. A soft CPI print that potentially paves the way for an expansion of Chinese stimulus efforts as growth decelerates. That would bode well for Australian exporters, who count on China as their top customer.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

AUD

Westpac Consumer Conf Index (OCT)

94.8

-

94.0

23:30

AUD

Westpac Consumer Conf Index (YoY) (OCT)

0.9%

-

-4.6%

0:30

AUD

New Motor Vehicle Sales (YoY) (SEP)

0.8%

-

-3.5%

0:30

AUD

New Motor Vehicle Sales (MoM) (SEP)

2.9%

-

-1.6%

1:30

CNY

Producer Price Index (YoY) (SEP)

-1.8%

-1.6%

-1.2%

1:30

CNY

Consumer Price Index (YoY) (SEP)

1.6%

1.7%

2.0%

4:30

JPY

Industrial Production (MoM) (AUG F)

-

-1.5%

4:30

JPY

Industrial Production (YoY) (AUG F)

-

-2.9%

4:30

JPY

Capacity Utilization (MoM) (AUG)

-

-0.8%

6:00

JPY

Machine Tool Orders (YoY) (SEP F)

-

34.8%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German CPI (MoM) (SEP F)

0.0%

0.0%

Medium

6:00

EUR

German CPI (YoY) (SEP F)

0.8%

0.8%

Medium

6:00

EUR

German CPI – EU Harmonized (MoM) (SEP F)

0.0%

0.0%

Medium

6:00

EUR

German CPI – EU Harmonized (YoY) (SEP F)

0.8%

0.8%

Medium

7:00

EUR

ECB President Draghi Speaks in Frankfurt

-

-

Low

8:30

GBP

Jobless Claims Change (SEP)

-35.0K

-37.2K

Medium

8:30

GBP

Claimant Count Rate (SEP)

2.8%

2.9%

Medium

8:30

GBP

ILO Unemployment Rate (3M) (AUG)

6.1%

6.2%

Medium

8:30

GBP

Average Weekly Earnings (3M/Y) (AUG)

0.7%

0.6%

Low

8:30

GBP

Weekly Earnings ex Bonus (3M/Y) (AUG)

0.8%

0.7%

Low

8:30

GBP

Employment Change (3M/3M) (AUG)

30K

74K

Low

9:00

CHF

Credit Suisse ZEW Survey (OCT)

-

-7.7

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.2433

1.2561

1.2609

1.2689

1.2737

1.2817

1.2945

GBPUSD

1.5567

1.5767

1.5835

1.5967

1.6035

1.6167

1.6367

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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