GemForex - weekly analysis

Winter is coming, and the US Dollar remains the catalyst behind all FX moves, recouping late September losses and turning in a positive performance for the first week of October. This performance, of course, does not spell good things for the rest of the FX Majors, which all have their own stage spotlight this week and are heavily correlated in implied volatility to the US Dollar. Nevertheless, last weeks rise in US Treasury yields and an impressive US Jobs report, helped the DXY to close higher to the detriment of the top three of its components, which are the Euro, the Pound, and the Japanese Yen. The Dollar is strengthening for the sixth week of the past eight weeks overall. 

This week, Fed policymakers will be on a lecture barrage this week, occupying the economic calendar in a month without any major Fed rate decision, with the most important data release being the US consumer price index on Thursday. Until then, we will get a clearer picture of the tone of comments by the Fed officials, after all the important expected financial data prints of the rest of the Major economies come out. 

On Monday, October 11, Chicago Fed President will have a speech, while Fed Vice Chair Brainard will give remarks later in the day. On Tuesday, Philadelphia Fed President Harker is set to talk followed by Cleveland Fed President Mester. 

On Wednesday, October 12, we expect the weekly US mortgage application data, an important report that implies the demand for mortgage loans, at a time when rates rise rapidly. A little bit later during the day, the September US producer price index will be released, an important indicator regarding inflation for producers of any sort. And for the end of the day, the September FOMC meeting minutes and a speech by Fed Governor Bowman are expected, together with the volatility that will follow with their words. 

On Thursday, October 13, weekly US jobless claims figures are due, as is the September US inflation report (consumer price index), which data prints will show if the Feds policies take root or if the Inflation problem persists. On Friday, as the last major US financial news, we expect the Retail Sales data prints for September, the August US business inventories, and the preliminary October US Michigan consumer sentiment report. 

From the other side of the Atlantic, on Tuesday, October 11, we await the GBP Claimant Count Changes, an important indicator of employment in the UK, and on October 12, the UK Gross Domestic Product data report, as well as the Industrial and Manufacturing Production data report accompanying it.

 While the BoE rate hikes fall short of the Fed, at the same time, the budget numbers do not add up and remain a challenge for the UK government. Depending on the Fed, further pressure is likely on the pound. 

From the other side of the British Channel, in mainland Europe, on Wednesday, October 12, we are due for the EUR Industrial Production, an important indicator to look out for, considering all the active policies regarding energy self-sufficiency, fell short. On Thursday, October 13, we will observe the German Harmonized PCI prints. The biggest European Economy is expected to struggle more than others, due to the energy policies of the EU, as well as the late reaction of the ECB to the increasingly worsening cost of operations month to month. 

The economic schedule is lighter in Asia this week, with the JPY Current Account data print for August coming first on Tuesday, October 11. This data report will be important for the Bank of Japan, which remains committed to intervening whenever necessary in the FX market, considering the Trade balance has to remain in Japan's favor. 

AUD CPI expectations coming out of Australia on Thursday, October 13. The Reserve Bank of Australia is committed to battling stubbornly high inflation, citing patience and gradually thinking to shift to a less hawkish path. It remains to be seen how the RBoA can reverse the advantage of the USD over the AUD. 

And for the last important news of the week, on Friday, October 14th, we expect the Chinese CPI print, the Exports/Imports, and the Trade Balance for September. China returned to the market after a one-week holiday, while the US dollar outperformed the Chinese Yuan. Looking forward, these reports will be crucial for the USD/CNH pair traders to watch for clear directions, however, the FOMC minutes may unveil the hawkish hopes of the policymakers, to the detriment of the CNH value to the dollar.