The Week Ahead: CPI, Employment, Retail Sales & PMI
Let's look at the news event's we've got lining up this week...
The GBP Consumer Price Index (CPI) report is releasing on Wednesday, which measures the change in the average price basket of goods and services by consumers, which can be anything from food, transportation and medical care. Changes in the CPI are used to assess price changes associated with living in the country. It is one of the most used statistics to identify periods of inflation or deflation.
Analysts are expecting a strong improvement from 0.7% to 1.4% for the economies annual CPI reading. This could be enough to boost BoE tightening speculations. We could see huge strength in the Pound if we see the data come out like so, and we could see the next high formed in GBPUSD, breaking past the recent 1.417 high.
(AUD) Employment Report
The AUD Employment Report is set to release on Thursday which shows the change in the number of employed people during the previous month. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity. The number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions.
We are expecting to see employment gains of 20.3k, which is significantly lower than the previous 70.7k, and the unemployment to continue staying at 5.6%. These numbers are not very notable, and in fact, do not show massive progress in the Australian economy; therefore some weakness may be shown on Thursday. We could also see some consolidation as these numbers are not notable at all.
(AUD + GBP) Retail Sales
The AUD and GBP Retail Sales Report are set to release on Friday which shows the total value of sales at a retail level. Like we mentioned earlier, consumer spending accounts for a majority of economic activity, and therefore when citizens spend, it is a sign that people have jobs, people are making money, and people are able to spend money for whatever it is they want.
Analysts expect to see a 0.5% increase to the AUD Retail Sales compared to the previous month at 1.3%. This shows regression, and the economy is doing worse instead of making progress. If the data comes out at so, expect weakness to the AUD. On the other hand, analysts expect to see a 4.5% increase to the GBP Retail Sales compared to the previous month at 5.4%. This also shows regression to the economy; however, as these numbers are still pretty high, we may not see as much weakness as the GBP as I expect to for the AUD.
The German Purchasing Managers' Index (PMI) data is releasing on Friday and it is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of a diffusion index, which essentially summarises market conditions viewed by purchasing managers if they are expanding, staying the same or contracting. The PMI aims to provide information about current and future business conditions to company decision-makers, analysts, and investors.
The headline PMI is a number from 0 to 100. A PMI above 50 represents an expansion when compared with the previous month. A reading below 50 represents a contraction, and a reading at 50 indicates no change compared to the previous month. The further away from 50, the greater the level of change.
Services PMI is expected to come out at 52.0, which is higher than the previous month and above 50.0, which shows expansion and is really good for the economy. Manufacturing PMI on the other hand is expected to decrease from 66.2 to 66.0, which is a tiny change; however, as it is still in expansion, this figure may not cause as much volatility as the Services PMI is expected to.
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