Forex Market Recap (14-19 November 2021)

The GBP took the top spot this week due to the latest inflation and employment updates further supported by rate hike speculation. The AUD and EUR battled it out at the bottom, after RBA Governor Lowe talked down the probabilities of a rate hike in 2022, and commentary from ECB President Lagarde reiterating that the high inflation environment will be transitory.

USD:

• Fed’s Kashkari expects higher inflation continuing over next few months
• Retail sales rose 1.7% in October
• Purchase mortgage applications increased 6% on a seasonally unadjusted basis from September to October
• Housing starts fall 0.7% in October; Building permits rise 4.0%
• NY Fed’s Williams says inflation increases becoming broader based

EUR:

• ECB’s Lagarde sees inflation below 2% target in medium term
• GDP up by 2.2% and employment up by 0.9% in the euro area in Q3 2021
• ECB must be ready to act on inflation if proves to be more durable than expected
• Germany’s seven-day covid-19 incidence rate hit record levels of 336.9 cases per 100K people
• German producer prices in October rose by 18.4%, the most since 1951
• Bundesbank president Jens Weidmann contradicts the ECB party line on easy policy ahead of December meeting

GBP:

• The average UK house rose in price by 1.8% in October
• Bank of England Governor Bailey uncertain on inflation outlook; furloughed workers situation prompted surprising rate hold at last meeting
• Bank of England Haskel says too early to declare success on employment situation
• Brexit uncertainty also a contributor to postponing rate hike
• Unemployment rate at 4.3% in October; annual growth in average total pay was 5.8%
• UK inflation rises to 10-year high of 4.2%
• UK Retail sales in October: +0.8% vs. 0.0% in September

CAD:

• Canada Manufacturing sales declined 3.0% to C$58.5B in September
• Canadian wholesale sales grew 1.0% in September to C$71.3B
• BoC Governor Tiff Macklem says no rate increases until economic slack is absorbed
• BoC Deputy Governor Lawrence Schembri says rate hike may not come as soon as many expect
• Canadian inflation rate: 4.7% in October vs. 4.4% in September, an 18-year high and likely to keep rising
• Canada added 39.4K jobs in October; September revised up to 41K from 9.6K
• Canada flash retail sales estimate for October: +1.0% vs. -0.6% in September
• New home prices in Canada increased by 0.9% in October, slightly above the previous four month average

JPY:

• Resurgence of COVID-19 cases drags Japan’s economy by another 0.8% (3.0% annualized) in Q3 2021
• BoJ's Kuroda pledging to retain stimulus and projects inflation near 1% mid-next year
• Japan September core machinery orders flat from previous month
• Japan’s exports snapped seven months of double-digit growth in October due to slowing car shipments
• Japan PM Kishida unveils ¥56T ($490B) stimulus package
• Higher energy costs caused Japanese consumer prices to edge up by +0.1% for a 2nd month in a row in October

AUD:

• RBA Lowe reiterates that date and forecasts do not warrant increase in cash rate in 2022; first increase still not likely until 2024
• Q3 wage price index hits pre-pandemic rates but still short of RBA rate hike-inducing levels

NZD:

• Performance of Services Index falls to 44.6 in October vs. 46.9 in September
• Producer input price increases ease from 3.0% to 1.6%, output price increases down from 2.6% to 1.8% in Q3 2021
• New Zealand inflation expectations up from 2.27% to 2.96% in Q3; pushes up odds of rate hike at end of Nov.