Will Inflation Push the Market Even Lower?

Will Inflation Push the Market Even Lower?

A new week brings new portion of events that can bring volatility to the market. Let’s make a quick outlook to see what to expect.

UK GDP

October 12, GMT+3.

 

The UK Office for National Statistics will announce the update of Gross Domestic Product on Wednesday, October 12 at 09:00 GMT+3. GDP shows the change in the total value of all goods and services produced by the economy.

It’s widely accepted that the UK economy is in decline. The UK has serious problems with economic growth. The last two weeks have shown that things can get worse and worse and that the current government has no idea how to change the situation. On September 23, the government of Prime Minister Liz Truss unveiled its economic plan. Most analysts immediately saw this as a fiscally irresponsible tax cut that would widen the budget deficit and fuel inflation. Both are already problems in the UK.

Due to recent events, it’s more important than ever to look at what is happening with the British economy right now.

  • If the “Actual” number is higher than expected, GBP will rise. 
  • Otherwise, GBP will fall.

Instruments to trade: GBPUSD, EURGBP, GBPCAD.

 

FOMC Meeting Minutes

October 12, 21:00 GMT+3.

The Federal Reserve will publish the detailed report of their meeting on October 12, 21 GMT+3. The meeting itself was on September 21. That time, the Fed hiked the rate by 75 basis points, which is the same as expected. The Fed is continuing to raise the interest rate, and its Fed Chair Jerome Powell said they would continue to hike the rate until inflation returns to the 2% target level.

Right after the release, US dollar index rose by more that 1200 points, the volatility was significant.

UsDollarH1.png

This time, the report will bring more detailed information about possible steps the Fed can make. 

  • If the Federal Reserve is hawkish, the USD will strengthen;
  • On the contrary, cautious comments will make the USD weaker.

Instruments to trade: EURUSD, GBPUSD, USDJPY.

 

 

US Inflation Rate

October 13, 15:30 GMT+3.

 

The US Bureau of Labor Statistics will publish its update on inflation on October 13 at 15:30 GMT+3. Inflation is currently one of the hottest topics. That's because it's on the Fed's radar. It wants to bring inflation down. If the upcoming CPI data continues to rise, the Fed may try to change its policy to a more hawkish one. Of course, the Fed is already expected to raise rates at the upcoming November and December meetings, but these increases may be larger or may last until 2023. Any scenario will be considered.

  • If the US CPI exceeds forecasted, USD will likely strengthen against other currencies.
  • Alternatively, the USD will drop.

Instruments to trade: EURUSD, USDCAD, USDCHF.

 

US Retail Sales

October 14 15:30 GMT+3.

 

The US Census Bureau will announce the Retail Sales and Core Retail Sales on October 14 at 15:30 GMT+3. It shows the change in the total cost of sales at the retail level. Last time the US retail sales rose unexpectedly as consumer demand for goods broadly held but showed signs of slowing amid historical inflation. US retail sales data show that demand is holding up despite high inflation. Economists expect a 0.1% drop in retail sales this time. For the Federal Reserve, consumer demand for goods is holding up well enough in the face of soaring interest rates and historically high inflation to give policymakers more reason to aggressively increase borrowing costs.

The indicators are likely to influence the USD pairs. You should wait for the releases and compare actual figures with forecasted ones in the economic calendar.

  • If the actual numbers beat expectations, the USD will go up.
  • On the contrary, lower numbers will pull the USD down.

Instruments to trade: XAUUSD, EURUSD, USDCAD, USDCHF.

 

Following all these events can bring insights only about your technical analysis, but improve your fundamental analysis as well. Good luck in your trading!

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