Market Watch: Europe & US Sessions – What to Expect

Stay informed with our Market Watch: Europe & US sessions, covering currencies, commodities, and central bank updates.

What occurred during the Asia session?

In the third quarter of 2023, Australia’s Wage Price Index grew by 4.0% YoY, reaching its highest point since the first quarter of 2009. The accommodation and food services and the health care and social assistance sectors significantly contributed to this wage growth. Following softer US CPI data overnight, the Aussie will likely receive further uplift.

Meanwhile, China experienced an increase in industrial production to 4.6% YoY in October, slightly surpassing the estimated 4.5%. This growth marked the fastest expansion since April of this year, with the mining and manufacturing sectors being the most significant contributors to overall growth. 

As a result, WTI oil prices rose toward the $78.50 region, and we anticipate further upward movement as the day progresses.

What does this mean for the Europe & US sessions?

In September, retail sales demonstrated a 0.7% MoM growth, marking the seventh consecutive month of expansion. Despite high prices and elevated borrowing costs, consumer spending remains robust. However, October’s estimate of -0.3% suggests the first decline in seven months, and weaker-than-expected sales could negatively impact the US Dollar.

The Producer Price Index (PPI), reflecting wholesale inflation, saw a 0.5% MoM rise in September. Although gasoline costs surged for the month, the 0.5% gain was the lowest reading in three months. Softer PPI readings are likely to create downward pressure on the dollar.

Market Watch: Europe & US Sessions – What to Expect

The Dollar Index (DXY)

Key events today

• Retail Sales (1:30 pm GMT)
• PPI (1:30 pm GMT)

What can we anticipate from DXY today?

Retail sales in September showed a 0.7% MoM growth, marking the seventh consecutive month of expansion. Despite high prices and elevated borrowing costs, consumer spending remains robust. However, October’s estimate of -0.3% suggests the first decline in seven months, and weaker-than-expected sales could negatively impact the US Dollar.

The Producer Price Index (PPI), reflecting wholesale inflation, saw a 0.5% MoM rise in September. Although gasoline costs surged for the month, the 0.5% gain was the lowest reading in three months. Softer PPI readings are likely to create downward pressure on the dollar. Regardless of the outcome, we expect today to be a relatively volatile period for gold prices.

Next 24 Hours Bias

Strong Bearish

Gold (XAU)

Key events today

• Retail Sales (1:30 pm GMT)
• PPI (1:30 pm GMT)

What can we expect from Gold today?

Retail sales in September showed a 0.7% MoM growth, marking the seventh consecutive month of expansion. Despite high prices and elevated borrowing costs, consumer spending remains robust. However, October’s estimate of -0.3% suggests the first decline in seven months, and weaker-than-expected sales could negatively impact the US Dollar.

The Producer Price Index (PPI), reflecting wholesale inflation, saw a 0.5% MoM rise in September. Although gasoline costs surged for the month, the 0.5% gain was the lowest reading in three months. Softer PPI readings are likely to create downward pressure on the dollar. Irrespective of the outcome, we anticipate today to be a relatively volatile period for gold prices.

Next 24 Hours Bias

Strong Bullish

The Australian Dollar (AUD)

Key events today

• Wage Price Index (12:30 am GMT)

What can we expect from AUD today?

Australia’s Wage Price Index eased from 3.7% YoY to 3.6% YoY in the second quarter of 2023. The first quarter reading of 3.7% marks the peak in wage growth, as the third quarter estimate of 1.3% points to further moderation. A lower-than-expected task could increase the downward pressures on the Aussie.

Central Bank Notes

The RBA increased the cash rate target by 25 basis points to 4.35%, the first increase in five meetings. Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago. Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks. The next meeting is on 5 December 2023.

Next 24 Hours Bias

Medium Bullish

The Kiwi Dollar (NZD)

Key events today

• No major news events.

What can we expect from NZD today?

Following softer-than-expected inflation data from the US, the Kiwi surged over 150 pips to rise above 0.6000 overnight. As Asian markets digest the latest CPI readings this morning, the Kiwi will likely remain elevated today.

Central Bank Notes

The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting. The Committee agreed that the OCR needs to stay at a restrictive level to ensure that annual consumer price inflation returns to the 1 to 3% target range and to support maximum sustainable employment. While supply constraints in the economy continue to ease, inflation remains too high. Spending must remain subdued to better match the economy’s ability to supply goods and services so that consumer price inflation returns to its target range. The next meeting is on 29 November 2023.

Next 24 Hours Bias

Strong Bullish

The Japanese Yen (JPY)

Key events today

• Trade Balance (11:50 pm GMT)

What can we expect from JPY today?

In September, Japan’s trade balance unexpectedly swung into surplus with a figure of ¥62.4B. The surplus marked the first in three months as exports rose, supported by robust demand from the US. Another month of widening surplus could strengthen the Japanese yen and cause USD/JPY to pull back.

Central Bank Notes

The Bank will continue with QQE with Yield Curve Control, aiming to achieve the price stability target of 2.0% as long as it is necessary to maintain that target stably. The Bank of Japan decided on the following measures: Yield curve control: Negative interest rate of -0.1% on policy-rate balances and purchase of Japanese government bonds to keep 10-year JGB yields at around 0% while regarding the upper bound of 1.0% for 10-year JGB yields as a reference in its market operations. Medium- to long-term inflation expectations have risen moderately. As actual inflation decelerates, analysts expect inflation expectations to increase instead toward the end of the projection period. The positive turn in the output gap and changes in firms’ wage- and price-setting behavior, along with labor-management wage negotiations, will likely contribute to a sustained rise in prices accompanied by wage increases. Analysts expect Japan’s economy to maintain its moderate recovery, supported by factors such as the materialization of pent-up demand. However, they anticipate that a slowdown in the pace of recovery in overseas economies will exert downward pressure. The next meeting is on 19 December 2023.

Next 24 Hours Bias

Medium Bearish

The Euro (EUR)

Key events today

• Trade Balance (10:00 am GMT)
• Industrial Production (10:00 am GMT)

What can we expect from EUR today?

The Eurozone’s trade balance posted a surplus of €6.7B in August, with exports and imports.

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