We start the week with the US dollar little changed despite concerns of a government shutdown in the coming days. Congress has until the end of the week to pass a new stopgap bill before funding runs out after November 17. This will likely be a busy couple of days for the US, with key inflation data due, as we await the latest CPI release on Tuesday and PPI on Thursday. A dip in the October inflation report is expected, but it remains clear that inflation is still a long way above the Fed’s 2% target, keeping the central bank on a potentially tightening bias despite holding rates at the last policy meeting. Wednesday sees the release of Retail Sales, which are expected to have slowed, driven by a decline in new vehicles and gasoline sales. The Empire Manufacturing Survey is also released on Wednesday, with Initial Claims, Philly Fed Business Outlook, and Industrial Production all out on Thursday.
This could be a key week for the pound and UK data as markets await the October inflation report on Wednesday, which is expected to decelerate below 5% for the first time in two years. An inline print would ease pressure on both the government and the BoE who kept rates unchanged for the second consecutive meeting. Tuesday sees the release of the October employment report and Retail Sales are due out on Friday. The pound slipped at the end of last week and 1.22 in GBPUSD remains a pivotal level, with support seen at 1.20 and last week’s high of 1.2425 seen as initial resistance.
The single currency is treading water, with EURUSD hovering just below 1.07 as markets await Tuesday’s German ZEW report and the final reading of euro area CPI for October, due on Friday. The final update is expected to confirm that underlying price pressures are subsiding, giving the ECB confidence to keep interest rates unchanged.
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