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US retail sales, UK employment eyed - RBS

FXStreet (Bali) - FX Strategists at RBS review the day ahead, highlighting the US retail sales and UK job numbers as the main events that traders should pay attention to.

Key Quotes

"US retail sales tomorrow will give an indication of whether US consumption has maintained momentum even as global growth concerns increase. The Ward’s Automotive Group’s measure of US total vehicle sales released earlier this month showed annualized auto sales in September fell harshly after a jump in August. That drop, along with a dip in fuel prices, may result in headline m/m retail sales declining in September (RBSe -0.3%, consensus -0.2%). Still, with underlying fundamentals still positive for consumption and potential boosts from cooling weather and the introduction of new popular products, we expect a 0.4% m/m gain in underlying retail sales. The September PPI is released as well along with the October Empire manufacturing index, which rose to its highest level since 2009 in September."

"In early September, Bank of England Governor Carney said if rate hikes were to begin “by the spring”, he felt that would be consistent with the BoE reaching its inflation goals over its forecast horizon. The sharp drop in both the headline and core inflation rates in September, consistent with the BRC Shop Price Index showing retail prices plunged in September, has challenged that view. UK employment figures may keep downside pressure on GBP, and we favour tactical short GBP/JPY exposure as JPY short positions are squeezed. We anticipate wage inflation will remain muted, at just +0.7% 3m y/y in August – signs of slowing price inflation and muted wage inflation gives the BoE space to stay dovish, particularly as the economy faces new challenges from a slowdown in Europe."

"ECB President Draghi will speak twice tomorrow, but those two speeches will be opening remarks at an ECB statistical conference and at the ECB’s European Cultural Days, meaning monetary policy is unlikely to be the focus. The flash estimate of German September inflation is due for revision as well (flash estimate +0.8% y/y)."

"Finally, the busy data week in China continues with the release of CPI during the Asia session. Falling commodity prices and activity data may put downward pressure on headline inflation. While times are not released, China may release a myriad of activity data including quarterly FX reserves."

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