Decisive Week for the Dollar as PCE Inflation and NFP Eyed
XM Group | Nov 25, 2022 09:50AM ET
Jobs report to headline busy week for the dollar
Hawkish language from the Fed may have put a halt to the US dollar’s slide but it wasn’t enough to spur much of a recovery. With the November jobs report and a raft of other key indicators on the way, it could go either way for the greenback, although the risk seems tilted more to the downside.
The week will initially get off to a slow start, with only home prices and the consumer confidence index drawing some attention on Tuesday. On Wednesday, the second estimate of third quarter GDP growth might show a small upward revision. Other releases will include the ADP employment report – considered a precursor to Friday’s official numbers, the Chicago PMI and pending home sales.
After the surprisingly soft CPI readings, investors will be watching on Thursday to see whether the Fed’s preferred inflation metric of the core PCE price index will also cool off substantially. It is forecast to rise 0.3% month-on-month in October versus 0.5% previously. Included in this report are the personal income and spending figures.
If the alliance does agree on raising output, oil-linked currencies such as the loonie might take a hit should oil prices plummet in response, although dollar weakness would go some way in mitigating the losses and risk assets in general would react positively to the prospect of lower energy prices.
China woes still weighing on aussie
In Australia, the Reserve Bank is in a similar predicament and the highlight for the local dollar will be Wednesday’s inflation figures. Australia has only just started reporting monthly CPI readings and these could be vital in shaping the steepness of the policy path in the coming months.
Quarterly data on capital expenditure will be monitored too on Thursday but traders will probably be paying more attention to Chinese indicators a day earlier when the manufacturing PMIs are due.
The Australian dollar has enjoyed a decent rally against the greenback despite disappointment that China is not about to abandon its zero-Covid policy anytime soon. But if the PMIs point to more pain for the Chinese economy, the aussie’s rebound might start to lag its peers amid the somewhat uncertain demand outlook for Australian exporters.
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