Week Ahead – Focus on US retail sales as debt ceiling drama rumbles on
XM Group | May 12, 2023 07:38AM ET
Can the dollar shake off the blues?
It’s been a rough year for the dollar so far. Despite mounting signs that the US economy has regained momentum, the greenback has been trading ‘heavy’, struggling to sustain any upward momentum. Most rallies get rejected quickly, even if they are backed up by stronger data.
Behind this sluggishness lies speculation that the Fed is about to start cutting interest rates soon. Markets expect the Fed to slash rates three times later this year in 25bps increments, starting in September. This is striking considering that core inflation seems sticky around 5.5%, way above its target.
Finally in Turkey, the nation will elect its next parliament and president on Sunday. President Erdogan is lagging behind his main rival Kilicdaroglu, although neither candidate is expected to secure 50% of the votes, which means there will probably be a second round in two weeks.
A strong showing by Kilicdaroglu could help the Turkish lira to appreciate, perhaps with a large gap at the open on Monday, on expectations that a new government will restore orthodox economic policies and allow the central bank to raise interest rates in order to fight runaway inflation.
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