Morning Brief – The Week Ahead

During the upcoming trading week, the central focus for traders will be the release of the CPI and PPI inflation from the United States economy and the release of the FOMC minutes.

It is likely that the FOMC meeting minutes will be a non-event due to the overall hawkishness from the FED at the last meeting and the fact that nothing has changed.

This week we also see a G20 Finance ministers meeting and the release of important growth and employment and unemployment data from the United Kingdom economy.

UK Economy

Expectations are for the UK unemployment rate in the 3-month period to August to hold steady at 3.6%. The prior report saw an unexpected decline in the unemployment rate to 3.6% from 3.8%, marking the lowest level since 1974.

UK GDP is on the agenda this week and expectations are for month-on-month UK GDP in August to be flat with the 3-month rate at -0.2%. Expect poor data this week as the UK economy was unable to benefit from a post-bank holiday rebound after the Queen’s Jubilee marred the overall economy.

G20 Finance Ministers Meeting

Expectations are that finance chiefs and central bank heads will discuss a coordinated response to alleviate some of the stress seen in financial markets of late this week.

The Financial Times notes that this has given rise to hopes of a Plaza Accord II. The original Plaza Accord was a deal finance ministers and central banks struck in 1985 in response to a surging US dollar.

US CPI

Consumer price data for September will be mixed most analysts believe. The headline is seen rising 0.2% M/M, picking up from the prior rate of 0.1% in August, but the annual headline is seen paring back to 8.1% year on year from 8.3%.

A similarly mixed showing is expected to be seen in the core measures, with the street estimating a monthly rise of 0.5% month on month, though the annual measure of core inflation is likely to pick up to 6.5%.

Should we see inflation coming in hotter than expected we should probably expect stocks to sell off in a major way and for the US dollar index to continue to rise.