Market Outlook for the Week of November 14-18 | Forexlive

Last week the U.S.
CPI data came below expectations suggesting the Fed might slow down the pace of
tightening, but this doesn’t mean the fight against inflation is over. There
has to be a clear sign of inflation cooling down. The market now expects a
50bps rate hike in December.

SNB’s Jordan said he
is “prepared to take all measures” including selling FX, which he
also mentioned in the past, but this time his tone was more convincing causing
a market reaction that strengthened CHF on Friday.

This week we have a
light calendar on Monday, followed by the monetary policy meeting minutes
Tuesday in Australia and the U.S. empire state manufacturing index, PPI m/m and
core PPI m/m. Tuesday will also be busy with the G20 meetings.

Wednesday will reveal
the wage price index q/q for Australia, the inflation data for the U.K. and
Canada; and the core retail sales m/m and retail sales m/m for the U.S. In the
U.K. we’ll also have the monetary policy report hearings and BOE Gov Bailey is
expected to speak.

Thursday will bring
the employment change and unemployment rate for Australia, as well as the U.S.
housing starts, followed by U.S. existing home sales data on Friday.

A few Fed members are
expected to deliver their remarks over the week including Brainard who’s
expected to speak on the economic outlook at a Bloomberg news event, in
Washington DC.

SNB’s Jordan will
speak again Monday at the “Club of 100” and Lagarde will have an
address Friday at the European Banking Congress in Frankfurt. Neither of them
are expected to say anything new as these types of events are not supposed to
create volatility in the market, but they’re worth keeping an eye on.

At the last RBA
meeting, the bank hiked the cash rate by 25bps while the market expected 50bps,
so it will be interesting to see if we will get clarifications on the matter
and whether to look for an additional 25bps rate hike until the end of the
year. The Governor said policy changes are not on a pre-set path and they will
be data dependent as the fight against inflation is far from over. The cash
rate is now at 2.85% and the Governor stressed that even though the Board
decided to hike by a lower magnitude now, it could return to higher increments
if necessary.

The G20 Meetings on
Tuesday and Wednesday will likely focus on geopolitics and could include a
meeting between Biden and Xi. Russia will send Foreign Minister Lavrov
according to Al Jazeera.

Retail sales in the
U.S. might see some increase due to the early holiday shopping season even if
over the previous period there was some slowing in consumer spending. Gas
prices started to grow back last month which means sales at gasoline stations
could boost the overall figures. Wells Fargo forecasts a 1% growth in retail
sales in October, meaning a 0.5% real gain. Industrial production should also
reflect a slight improvement of 0.2%, fuelled by consumer demand for durable
goods and high capacity utilization.

The U.K. inflation
data will be very important to watch this week. The market expects CPI y/y to
rise from 10.1% to 10.8% while the core CPI y/y to drop from 6.5% to 6.4%. The
economic situation in the U.K. doesn’t look promising. Last week’s GDP data was
above expectations, but still in negative territory which suggests the
beginning of a five-quarter recession. The housing market is also under
pressure and the labour market conditions are not showing signs of
improvement.

The employment data
for Australia is expected to show some easing this week, while the Japanese CPI
is expected to run hot, the consensus being for a rise from 3% to 3.5%. Many
analysts believe that inflation hasn’t peaked in Japan so it will be
interesting to see what happens next. BoJ Governor Kuroda’s tone was still very
dovish so it’s less likely that a significant change in policy will happen
before the end of the year.

The housing market in
the U.S. was negatively impacted over the last few months by increasing
mortgage rates. Buyer demand was clearly affected as well, and it is not
expected to show signs of improvement for some time. Existing home sales have
declined for the past eight months leading to September, and Wells Fargo
expects a further decline in October, bringing the overall annual pace to 4.31
million-unit from 4.71 in September.

USD/CAD
expectation

On the H1 chart the
pair closed the week near the 1.3235 level of support. A correction is expected
until the 1.3385 level of resistance or even 1.3480, the next resistance level
after that. From there the downtrend should resume targeting 1.3165 if nothing
significant happens in the market.

A risk for this trade
is the CPI data for the Canadian economy. The core CPI mm is expected to print
above expectations and the y/y data to drop from 6.9% to 6.4%.