US Inflation Data Will Be a Clue to the Value of the US Dollar Next Week

Market Summary

Gold fell more than 1% on Friday and headed for its second straight weekly decline on waning safe-haven demand while Federal Reserve Chair Jerome Powell's hawkish stance was key to weakening gold prices.

Gold has so far lost about $70 since reaching levels above $2,000 last week. Gold prices fell 1.1% in trading on Friday to $1,936.09 and were down 2.8% in their worst week in six.

Benchmark 10-year US Treasury yields and the dollar index (.DXY) are headed for weekly gains, making non-yielding gold less attractive to investors.

Gold will continue to trade sideways to lower levels in the near term unless Markets see an increase in geopolitical events and weak US economic reports.

Friday's data release on the University of Michigan Consumer sentiment for the US fell to 60.4 in November 2023, the lowest in six months, compared with 63.8 in October and a forecast of 63.7, according to preliminary estimates.

The index measuring current economic conditions fell to 65.7 from 70.6 and consumer expectations fell to 56.9 from 59.3, amid growing concerns about the negative impact of high interest rates and the ongoing Gaza Conflict.

In currency markets, the dollar index fell 0.11% to 105.79, and the euro strengthened 0.16% to $1.0683.

The Japanese yen weakened as traders remained wary of possible intervention to prop up the struggling currency. The yen weakened 0.12% at 151.51 per dollar.

The dollar touched a one-week high against the Australian and New Zealand dollars.

Oil prices rose nearly 2% as some speculators continued to take advantage of short positions, but remained on track for a third week of losses on signs of slowing demand. US crude rose $1.43 to $77.17/barrel.

Wall Street rose on Friday, as Treasury yields stabilized and investors digested the latest data and hawkish Fed comments. The S&P 500 rose 1.5%, hitting a 7-week high and the Nasdaq jumped 2% while the Dow Jones jumped 391 points.

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NEXT WEEK'S HIGH IMPACT ECONOMIC DATA AGENDA

1. US Market

The most important release is October's CPI. Consumer prices are seen rising 0.1% from September, which marked the lowest figure in four months, largely due to lower gasoline prices.

But excluding fuel and energy, the core CPI is likely to rise 0.3%, the same as in September, leaving the annual rate steady at 4.1%.

Meanwhile, retail sales are expected to fall 0.1%, marking the first decline in seven months. Other important indicators to follow include producer prices, industrial production, Philadelphia Fed Manufacturing Index, NAHB Housing Market Index, building permits and housing starts.

At the same time, earnings season continues with Home Depot, Cisco, Target, Walmart, and Applied Materials among the companies set to report quarterly earnings results.

2. European Market

The ZEW Economic Sentiment Indicator in Germany is expected to rise to its highest level in eight months, while industrial output in the Euro Area is likely to decline in September.

Additionally, the Euro Area will publish its second estimate of Q3 GDP, while the Netherlands, Poland and Russia will publish preliminary estimates.

Inflation updates in the Euro Area, France and Italy will also be released. Other important data include Euro Area foreign trade, German wholesale prices, French unemployment data, and Swiss industrial output.

3. United Kingdom Market

The economic calendar includes important reports on inflation, unemployment, and retail sales. The annual inflation rate in the UK is expected to fall to a 2-year low of 4.8% from 6.7% in September.

Additionally, retail sales are expected to rebound, while the unemployment rate is expected to continue its upward trend in Q3.

4. Asia Pacific Market

All eyes will be on China's industrial production, retail sales, unemployment, loans and investment figures for October.

Previous data for the period showed that Asia's largest economy failed to maintain its economic recovery since the third quarter, raising concerns that Beijing's GDP growth target of 5% for this year may not be achieved.

Meanwhile, Japan's GDP is expected to show a fresh contraction in the third quarter, while the October trade balance will reveal the impact of continued yen depreciation.

In Australia, investors await a number of forward-looking indicators, including November's Westpac consumer confidence. , October NAB business confidence index, and key employment data.