🚨 Priority Economic Data for the Week Ahead | Analytics with Qluster Research

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Hot inflation data steals the limelight, Doubts of 'transitory' price rises growing

Following a relatively quiet week of economic data, the US Dollar enjoyed a third consecutive week of upside gain as inflation numbers appear to deliver sustained support from October to November. As a result, the US Dollar Currency Index ($DXY) ended the last week stronger by 0.85% to 95.122, which is an increase from the previous week's rise of 0.10% to 94.129.

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Overview of the Previous Session Close

Major US economic data in the first half of the last week's schedule attracted the lion's share of focus to inflation. Specifically, doubt appears to grow surrounding the official view of surging price rises being transitory.

Recent data for October shows the annual core wholesale inflation rate holding steady at 6.8%, with the Producer Price Index (PPI) showing an increase of 0.4% in the month past. Annual wholesale inflations rates also held steady at 8.6%.

However, rises in consumer prices reveal a different narrative. In particular, the annual core inflation rate (Core Inflation Rate YoY) indicates inflation accelerating from 4.0% to 4.6%. Moreover, year on year inflation rates for consumers showed a rise to 6.2% from 5.4% in the previous month.

Consumer sentiment figures did little to ease concerns, with the Michigan Consumer Sentiment Index preliminary November figures falling from 71.7 to 66.8, disappointing market expectations of an increase to 72.4.

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The Pound

Third-quarter GDP and production in industrial and manufacturing sectors took centre stage. Other figures related to retail sales, housing prices and trade data appeared to have a muted effect on Pound price action. On a positive note, Month-on-Month (MoM) economic growth grew from August (0.4%) to September (0.6%).

Despite positive growth metrics, negatively skewed data in manufacturing (-0.1%) and industrial (-0.4%) quarterly production data pegged back the GBP on Thursday. 

The Pound fell to US$1.3414, down by 0.62%, compared to the week prior - where the GBP slumped by 1.34% to US$1.3498. The FTSE100 made a relatively more minor gain from the previous week's rise of 0.92%, finishing the last week up by 0.6%

The Eurozone

German trade data took the focus along with the latest figures from ZEW Economic Sentiment for Germany and the Eurozone. 

The ZEW Economic Sentiment Index leapt from 22.3 to 31.7 for Germany, while the Eurozone saw a rise to 25.9 from 21.0. However, Eurozone industrial production data disappointed with September's decline of 0.2%, furthering the fall from a 1.7% decline in August. Moreover, October's inflation data for France, Germany, and Spain have yet to disrupt the status quo of price action. 

In the last week, the Euro backtracked the previous week's rise to US$1.1567 (+0.08%) to end the week down by 1.05% to US$1.1445. Of the major European indices, the CAC40 ended highest by 0.72%. Meanwhile, the DAX40 and EuroStoxx600 finished the week up by 0.25% and 0.70%, respectively.

The Loonie

It was a quiet week for the Loonie (Canadian Dollar, CAD), with no significant data to direct CAD price action.

Following the previous week's slide against the US Dollar - where the Canadian Dollar fell 0.56% to C$1.2457 - the CAD finished the week ending the 12th of November down by 0.75% to C$1.2550.

The Yen

Similarly, there were no major data releases from the Far East last week. 

The Japanese Yen (JPY) pared back previous weekly gains, finishing the last week’s session down against the Greenback by 0.42% to ¥113.89. The prior week saw a gain of 0.47% to ¥113.410.

The Yuan

After seemingly positive trade data from the previous weekend, Chinese inflation data again took the focus in the latter half of last week. 

October's trade data shows China's USD trade surplus widening from US$66.76bn to US$84.54bn - far exceeding the expected forecast value of a narrowing surplus to US$65.55bn. 

Year on Year (YoY) exports were up 27.7% from the forecasted 24.5%. In comparison, September's exports rose by 28.1%. 

Import numbers reflect a rise of 20.6% against market expectations of a 25.0% increase, which is a gain from the prior month's rise of 17.6%.

Turning to inflation metrics, a further reported surge in wholesale inflationary pressure assessed support for risk-on assets. October data reveals that Chinese annualised inflation rates surged from 0.7% to 1.5%, surpassing the forecasted 1.4% increase. 

October saw an MoM rise by 0.7% in consumer prices, following September's increase of 0.1%, which appears to meet market expectations.

As a result, the Chinese Yuan (CNY) rose by 0.30% to CNY6.3797 against the Greenback and gained further ground from the previous week's rise of 0.10% to CNY6.9890. Likewise, the CSI300 and Hang Seng closed out the week up by 0.95% and 1.84%, respectively.

The Oceanic

The Kiwi Dollar had a mixed bag of economic data results, with the Business Purchasing Managers Index (PMI) hogging the attention. 

Electronic card retail sales figures saw a 10.1% jump, likely resulting from the easing of pandemic lockdown measures. However, preliminary figures from Australia and New Zealand Banking Group (ASX: ANZ) show an apparent decline in business confidence as reflected by the bank's index falling 18.1%. 

Although an increase in Business PMI from 51.4 to 54.3 in October offered some support to the Kiwi Dollar, the NZD succumbed to bearish pressure by falling to US$0.7044 (-1.03% MoM).

Across the Tasman Sea, local business and consumer sentiment figures emerged as leading economic data for the prior week. 

The Business Confidence Index released by the National Australia Bank (ASX: NAB) shows an MoM leap from 10.0 to 21.0, while data from Westpac Banking Corporation (ASX: WBC) shows the index up by 0.6% in October. 

It seems weak Aussie employment data enticed bears into action after a disappointing increase in unemployment from 4.6% to 5.2%, likely resulting from a reported 46.3K reduction in employment. A contributing factor appears to be the albeit minor rise in official participation rates to 64.7%. 

In response, Aussie Dollar bears appear to have sprung to life after driving AUD down by 0.92% to conclude the weekly session at US$0.7332. 

Now, moving to the new week ahead...

Qluster analysts expect further inflation uncertainty resulting from the line-up of critical economic data and business confidence metrics scheduled for this week in the new weekly trading session. 

Hints to values of upcoming priority core inflation data may emerge in the leadup price and production data, with further increase in price metrics expected to inflame further speculation of the transitory view on inflation touted by various central bankers. 

While there is no high impact data release planned for Australia this week, YoY Chinese industrial production due imminently may offer clues to AUD direction. 

What are your thoughts on this week’s economic data? Let the Qluster Research team know and leave a comment below 👇

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