Fed Minutes, U.S. Retail Sales and UK CPIs the Highlights of a Packed Week
XM Group | Aug 11, 2023 06:35AM ET
Dollar traders turn attention to retail sales and Fed minutes
Following the lower-than-expected CPI data for July, investors remained convinced that the Fed will not proceed with any other hikes and that nearly 130bps worth of rate reductions may be warranted for next year. This kept the euro/dollar uptrend intact, despite the US currency holding strong since July 18, as the pair rebounded somewhat from the upward sloping line drawn from the low of September 26.
At the latest FOMC meeting, Fed Chair Jerome Powell said that they will make decisions meeting by meeting, closely watching economic data, adding that they could hike again in September if the data suggests so, but also that they could choose to hold steady.
Therefore, after the CPIs, Tuesday’s retail sales and Wednesday’s industrial production for July may also be of high importance as they could determine whether the dollar can stage a solid comeback or not. Both the headline and excluding-autos sales are expected to have accelerated to 0.4% month-on-month from 0.2%, while industrial production is forecast to have rebounded 0.3% m/m after shrinking 0.5%.
The yen has been under pressure for the whole week as the slowdown in Japan’s wage growth may have weighed on expectations of further tightening by the BoJ. On Tuesday, the nation’s preliminary GDP numbers for Q2 are due to be released and the forecast points to a small acceleration to 0.8% qoq from 0.7%. That said, a potential miss in this data set may corroborate the view that Japanese officials may need to wait for a while longer, and thereby push the yen lower, especially if Friday’s CPIs reveal a slowdown.
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