By Kian Songra
Attention is turning toward a crucial set of economic data from the UK, expected to shape market expectations for the Bank of England’s (BoE) upcoming decision next month. Key inflation readings and labour market indicators will provide significant insight into the central bank’s next interest rate move.
The US economic calendar remains relatively light this week, with the September Retail Sales report standing out as the main event. However, with US markets closed on Monday for Columbus Day, the focus shifts earlier to Tuesday’s UK labour market data.
Tuesday will also see Canada’s latest inflation reading, which is anticipated to influence the Bank of Canada’s (BoC) future monetary policy stance. Generally, a higher reading is seen as bullish for the Canadian Dollar, whilst a low reading is seen as bearish. Those with Loonie requirements may want to monitor this reading closely, as the level of inflation is a key indicator in determining the stance the BOC may take regarding its future interest rate decisions.
Wednesday’s spotlight will be on the UK’s Consumer Price Index (CPI) for September, a pivotal release that could directly influence BoE’s November rate decision and have immediate effects on the Pound.
Economists predict that UK headline CPI inflation will dip below the Bank of England’s 2.0% target when September figures are reported, due to falling global oil prices. Although oil prices dropped to their lowest since 2021 in September, they’ve since recovered possibly due to war in the Middle East, suggesting fuel price declines are behind us. This could push the Bank of England to accelerate interest rate cuts, potentially impacting the Pound Sterling.
At 5.0%, the Bank Rate is the highest among G10 countries, making UK assets like bonds more attractive to international investors. This foreign demand boosts inflows and supports the Pound, hence why we have experienced a stellar year for the Pound thus far. This highlights the importance of this week’s jobs data and inflation figures to see how the Bank of England absorb the readings to forecast their upcoming interest rate decisions.
Thursday will bring further critical data from the US, including Retail Sales for September, alongside the weekly Jobless Claims and the Philadelphia Fed’s Manufacturing Index for October.
Adding to the global financial landscape, the European Central Bank (ECB) is set to reveal its policy decision on Thursday, which may impact GBP/EUR dynamics. If the ECB does cut Eurozone interest rates further, which they are predicted to do, the Pound could see its strength being held over the Euro, but subsequently, movement in GBP/USD may be seen as a result of investors shifting their interests away from the Euro.
Chinese economic activity figures expected on Friday could introduce volatility into the market, particularly influencing the risk-sensitive British Pound. Later that day, the UK Retail Sales report for September will follow, which is a strong indicator of how the UK economy is performing.
In addition to these core reports, comments from BoE and Federal Reserve officials will be highly anticipated by markets. Geopolitical developments in the Middle East could also exert pressure on markets and global risk sentiment.
With upcoming uncertainty globally and a critical week of potentially impactful data, it will be important to look at the various contract options we offer to take advantage of the rates whilst we are in favourable conditions. Stay in close contact with our friendly team, who can help assess your options to minimise your risk ahead of your future currency requirements.
Monday:
– US Colombus Day (Holiday)
– Canadian Thanksgiving Day (Holiday)
– BOE Dhingra Speech
Tuesday:
– UK Unemployment rate
– French Inflation
– Canadian Inflation rate
Wednesday:
– UK Inflation
– ECB President Lagarde’s Speech
Thursday:
– ECB Interest rate decision
– ECB Press conference
– US Retail Sales
– US Initial Jobless Claims
– Philadelphia FED Manufacturing Index
Friday:
– UK Retail Sales
– China’s GDP