A quiet week to think
Last week ended with a positive sentiment after that US inflation decreased and a significant turn was seen in China’s anti-Corona policies. The US dollar fell under the 107 mark, and now in the week ahead, while we do not have much important economic data, with the G20 meeting ahead, should wait and see if this trend can continue or not.
1- G20 Meeting – Tuesday & Wednesday
The 17th G20 Heads of State and Government Summit will take place on November 15-16, in Indonesia for two days. Under the theme ‘Recover Together, Recover Stronger’, the G20 leaders will have a very busy two days, especially with increasing tensions between Russia and Ukraine, and Revolution in Iran. This meeting will be held on Bali Island and its main topics are Global health architecture, Digital transformations, and Sustainable energy transitions.
2- Japan GDP – Tuesday
After 3.5% annual GDP growth in the second quarter, for the third quarter, we are waiting to see slower economic growth as confidence surveys such as the Purchasing Managers Indexes have softened, and both consumer and investment spending registered decreased in the third quarter compared with the second. The overall estimate is a 0.3% growth in this quarter, which will increase the annual GDP by only 1.1%. As these data would not change the BoJ policies, it can increase the pressure on the Japanese Yen against its crosses.
3- China Retail Sales, Employment, and Industrial Production – Tuesday
Recently weakness seen in the Chinese economy ended with some changes in China’s zero-Covid policies. While the global economy also is under pressure, which will decrease the demand, and both manufacturing and Service PMIs fell under the 50 expansion level, it is expected to see the same softness in October economic activities. Retail sales are expected to decrease to 0.7% growth, industrial output is expected to grow just 5.2% and unemployment is expected to stay unchanged at 5.5%. These numbers mean more weakness for the Chinese Yuan.
4- UK inflation – Wednesday
Unlike the US, inflation is not peaked in the UK, yet. We expect consumer inflation in October to increase by 1.7%, which can bring the annual rate to 10.6%, up from 10.1% in September. BoE expects that inflation to start decreasing in Q1 2023. Last week’s GDP number confirmed the UK economic recession, and with this BoE inflation expectation, we can guess less hawkish measures to start from 2023 by UK central bank. With these conditions, footsie still can be under pressure.
5- US Retail Sales – Wednesday
With the gradual reduction of inflation in the past months, we do expect real retail sales to grow in October by 0.9%. In short, consumers continue to spend despite elevated inflation. By getting closer to the New Year holidays, it is expected that retail sales to grow in the next months as well. With increasing sales, factory orders also must increase and it can support the economy and US stock markets.
6- US Housing Starts & Existing Home Sales – Thursday & Friday
With increasing mortgage costs, both housing starts and Home sales have been under pressure in recent months. Starts plummeted 8.1% in September to 1.439 million-unit. Existing home sales have also declined for eight months, falling to a 4.71 million-unit annual pace in September. While mortgage costs are still high, we are expecting to see lower numbers for both Housing Starts and Sales, which can increase the pressure on the US dollar, at least in the short term.