This week: IMF forecasts, US inflation data in focus

  • by Ahmed Mamdouh
  • October 8, 2018, 11:26 AM
  • 329 Views
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This week, investors will focus on the International Monetary Fund (IMF) quarterly world economic outlook as well as US inflation data, while markets will keep their eyes open on the latest movements in the bond market.

The IMF warned last week that the prolonged period of very low interest rates in advanced economies as well as growing public debt had increased risks to the global economy.

The Fund will release its latest global outlook report, which is expected to witness a downside revision to global growth prospects amid escalating US-China trade war.

US dollar

Last week, the U.S. dollar resumed its advance for a second straight week after the release of strong U.S. economic data and optimistic comments from Federal Reserve Chairman Jerome Powell.

Investors will watch US inflation reports due this week, as they may increase or reduce the chances of another Fed rate hike ahead of the end of the current year.

After a 0.1 percent drop in August, the U.S. producer price index may show a 0.1 percent increase in September, while it could stabilize at 2.8 percent year-on-year, according to analysts' forecasts.

The U.S. consumer price index may show a 0.2% rise in September and a 2.7% increase year-on-year.

U.S. President Donald Trump has earlier expressed his concerns about rising global oil prices that would raise inflation and thus adversely affect consumer spending.

Therefore, inflation data will be very important in the coming period as it will probably determine whether the Fed would hike interest rates for a fourth time in December.

Accordingly, the dollar will be largely affected this week by inflation data as well as the movements of US bonds and their yields.

Euro

The euro came under further pressure last week amid concerns about Italy's budget and the slowdown in economic activity in the euro area in September.

Perhaps the most important this week will be the minutes of the ECB meeting in September, which will reveal details of the economic conditions that weighed on the ECB's monetary decision last month.

Most likely, the euro will be more affected by the general sentiment in the markets, in addition to any developments related to the Italian government's budget.

Pound Sterling

The British pound showed balanced movements last week as the slowdown in U.K. services and construction sectors was offset by optimism over Britain's potential Brexit agreement with the European Union.

This week, Britain's National Statistical Office will release its monthly GDP gauge for August but it may not have much impact. Investors will also focus on UK industrial production and trade balance figures for the month of August.

Investors should continue to follow the latest Brexit developments as any positive news will support the pound, while the opposite is true.

Commodities

Last week, gold was able to rebound after it found some support near $1180 an ounce despite the rise in U.S. bond yield to a record high.

Gold could get its direction this week from the dollar’s movements that will be affected by the bond market and U.S. inflation data.

Regarding oil, the prices fell slightly by the end of last week after hitting a new four-year high, amidst worries about oil supplies as US sanctions on Iran's oil exports will take effect in early November.

US oil inventories may have dropped by 0.33 million barrels in the week ended October 5 after a 7.97 million-barrel gain the previous week, according to the EIA U.S. government report due this week.

While a drop in US crude inventories should help oil prices continue their rally, the US sanctions on Iran and IMF forecasts could have greater impact.

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