When is USD trading like a London bus? When you wait for ages and then everything arrives at once.
You’d think someone could plan it better, you know, spread the events out, give traders a chance to digest and react to them before the next one arrives but no, this week, it’s all happening in around 48 hours. So we’re ordering take out and setting up our plays from Wednesday 1.30pm GMT as the USD takes a ride to the end of the week.
Wednesday 1.30pm GMT
USD Import Prices
The first significant announcement of the week, this is the earliest government-released inflation data, which is why traders are interested. It’s been just about keeping its head above water in recent months so this is the first negative forecast (-0.1%). But the reality has been lower than the forecasts most of the time recently so maybe that will happen again.
Wednesday 3.30pm GMT
Crude Oil Inventories
Traders always love oil and last month’s shocking -14.5M drop against the expected 0.6M rise will be at the front of their minds this week. There’s no current forecast so it’s anyone’s guess what will happen.
Thursday 1.30pm GMT
This is the gloves off bare knuckle ride of the week as 8 major events vie for traders’ attention and the markets can expect a crazy rollercoaster ride.
Core Retail Sales
This was better than or as predicted from April to August when it dropped to -0.3%.The Core data excludes automobile sales which have a habit of fluctuating wildly so it’s seen as a more reliable indicator of the public’s spending habits than Retail Sales, and this is a key factor for currency.
Producer Price Index
The last six months have been variable with no consistent pattern of growth or contraction. Last month produced a surprising contraction of -0.4% against the 0.1% growth forecast. Pundits are saying a tiny return to growth this month at 0.1%. The PPI is a leading gauge of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer.
Philly Fed Manufacturing Index
Around 250 manufacturers in one small district of the States are asked to rate the relative level of general business conditions and the stock markets take this very seriously. The mind boggles but it is, apparently, a key indicator of economic health. Results have been highly variable over the last six months with a massive drop from 4.7 to -2.9 between June and July then a bounce back to 2.0 in August. Predictions are for a cautious 1.1 this month but either way currency traders will be watching closely.
Consumer spending is the single biggest factor in the level of overall economic activity. This result is the earliest and broadest look at vital consumer spending data. While it has been generally positive for last six months, there was a surprise drop to 0.0% in August against the anticipated 0.4%. It’s looking worse for September with forecasts of -0.1%. Not good.
Sit up, drink up and listen up. When people are out of work, they tend to spend less so the change in new unemployment insurance claims is serious business for the economy. Not only that but unemployment is also a major consideration for those steering the country’s monetary policy and that means interest rates. When the markets are in turmoil or more uncertain than usual, traders pay more attention. Figures dropped from 267K a month ago to 259K last week and predictions are for a rise to 262K. Not good again.
Core Producer Price Index (Core PPI)
This Index excludes food and energy so it’s not as important for the markets as the PPI also being announced at this time. It dipped last month after a few months’ increase and predictions are for a moderate rise to 0.1% from -0.3%. Don’t muddle this event up with the very important Core CPI on Friday. Traders care a lot about that one.
Current Account aka International Transactions
Currency traders are interested as this is directly linked to the demand for a currency. If foreigners are buying currency so they can do business in that country there is a rising surplus. This is a quarterly announcement and it’s been negative for a long time. Last quarter’s -125B is still a long way below figures a year ago (-110B). Forecasters currently predict an improvement of 5B (-120B).
Empire State Manufacturing Index
Sounds sexier than it is. This survey looks at New York instead of Philadelphia and only asks 200 manufacturers but traders still rate it extremely highly and the markets are going to jump around whatever the figure is. There was a cold blow to the currency last month with an unpredicted nosedive in confidence ratings to -4.2. Not good when forecasters had been saying 2.1. This time a climb back to -0.9 is predicted, which is still not good but better.
Capacity Utilization Rate
When producers, utilities and mines are working near their capacity they raise prices. This hits the customers and then we’re looking at inflation increases. It’s good for currency trading when the rate is higher than the forecast. There’s been a couple of good months recently with a rise from 74.9% to 75.9%. Indications are for 75.8% so not much change. But if there is, traders will react.
Industrial Production aka Factory Output
Another indicator with a couple of good months recently with bigger than predicted rises. This month pundits are predicting a drop from 0.7 to -0.2. Not good news for the dollar. But with everything else going on will this be enough to sway traders?
Consumer Price Index
Important but not half as important as the Core CPI coming out at the same time. Inflation is heavily related to consumer prices and a domino effect can cause a rise in interest rates if there is enough upwards pressure. Last month the forecast matched the reality with both at 0.0%. Predictions are for minimal growth to 0.1%.
This is it. One of the biggest USD figures for traders to crunch this week. Taking food and energy out of the mix removes a lot of the volatility of the CPI and the markets and the FOMC listen carefully. So should you. It’s been around 0.1% to 0.2% for months. Last month slid to 0.1% but the news on the grapevine is a nudge back to 0.2%. Good news if true.
Prelim UoM Consumer Sentiment
The last sizeable piece of action this week. Make sure to close your trades after you ride this one out; plan your strategy and your exit. How confident Joe Public feels about his finances is a major clue to his spending habits. Is he raising the financial drawbridge and tucking that paycheque under the mattress or heading to the mall to splash out. 500 average Americans tell the University of Michigan how they feel and a figure is spewed out. Confidence has been dropping since May and currently stands at 89.8 though, despite the other news this week, there’s a predicted rise to 91.0. Do they know something we don’t or are they being too optimistic?