The US dollar was higher against major pairs on Friday, but not enough to end up the week on positive territory. A stock market rout took its toll on the greenback and the subsequent rebound in stock prices supported the currency ahead of the weekend. Strong US data and a clear interest rate hike path by the U.S. Federal Reserve have boosted the dollar with investors focusing on the release of US retail sales data on Monday, October 15 at 8:30 am EDT.

  • US retail sales expected to gain 0.7 percent
  • US Treasury Currency report not expected to brand China a fx manipulator
  • Fed minutes to be release on Wednesday

Euro to Trade on Italian Budget Drama

The EUR/USD fell 0.31 percent on Friday. The single currency is trading at 1.1557 at the end of the week. Volatility in the market was such that the EUR will end up appreciating 0.35 percent in the last five trading days. Italian budget drama to continue next week with few economic indicators in Europe to offset any potential downward pressure.

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The retail sales data in the US and the publication of the meeting minutes from the last Federal Open Market Committee (FOMC) will guide the USD. The Fed has hiked three times this year and a 25 basis points lift is expected in December. The gradual path started by Fed Chair Yellen and continued by Jay Powell has found some resistance from the White House, but it soldiers on.

The International Monetary Fund (IMF) cut its global growth forecast in 2018. The Euro area was downgraded with Germany and France projected lower. The EU is forecasted to grow 2 percent in 2018 and 1.9 percent in 2019. The United States by comparison is expected to gain 2.9 percent and 2.5 percent. Trade concerns were cited by the IMF as a reason to have lower expectations as tariffs will impact growth.

Gold Lower as USD and Equities Recover

Gold dropped 0.51 percent on Friday, but held on to a 1.3 percent gain on a weekly basis. The yellow metal was one of the best performers as a stock market sell off caused other asset classes to fall along with equities. The safe haven appeal of gold resurfaced and boosted the metal.

The dollar bounced back on Friday and limited the gains of gold as the market focused on next week’s retail sales data. Inflation in the US was below expectation and although it dented the probability of a rate hike in December, the monetary policy decision from the Fed is still priced in at 81.4 percent for a 25 basis point lift.

Oil Gains on Friday But Breaks 5 Week Rally

Oil prices were higher on Friday with WTI rising almost 1 percent and Brent climbing 0.55 percent. Energy prices did not register a weekly gain, breaking a five week streak, as global stock markets fell. A perfect storm of technology company breaches and global growth downgrades caused anxiety amongst investors.

Oil prices have been sensitive to comments from the Trump administration on their production. The irony is that the sanctions on Iranian exports are one of the main factors keeping crude bid. Saudi Arabia has some hard choices to make and this week’s monthly OPEC report showed that oil production has risen in September to make up for the Iranian shortfall.

Crude was able to gain some ground on Friday despite the USD getting back some of its mojo ahead of the weekend. The week ahead starts early for the dollar with retail sales expected to have improved and wash some of the disappointment from the missed inflation data.

Market events to watch this week:

Monday, October 15

  • 8:30am USD Core Retail Sales m/m
  • 8:30am USD Retail Sales m/m
  • 10:30am CAD BOC Business Outlook Survey
  • Tentative USD Treasury Currency Report
  • 5:45pm NZD CPI q/q
  • 8:30pm AUD Monetary Policy Meeting Minutes

Tuesday, October 16

  • 4:30am GBP Average Earnings Index 3m/y

Wednesday, October 17

  • 4:30am GBP CPI y/y
  • 2:00pm USD FOMC Meeting Minutes
  • 8:30pm AUD Employment Change
  • 8:30pm AUD Unemployment Rate

Thursday, October 18

  • 4:30am GBP Retail Sales m/m
  • All Day EUR EU Economic Summit
  • 10:00pm CNY GDP q/y

Friday, October 19

  • 8:30am CAD CPI m/m
  • 8:30am CAD Core Retail Sales m/m

*All times EDT