The US dollar has started the week a touch softer, with the dollar index dipping after gaining last week. Treasury yields are up a little with markets remaining nervous of the geopolitical risk of a ground invasion by Israel, pushing the price of oil higher with Brent trading near USD 91 per barrel after surging over 5% of Friday.- Ahead this week we look for further clues on the strength of the US economy, with Retail Sales data out on Tuesday, where sales are expected to have grown 0.2% in September, boosted by Labor day deals. The forward-looking Empire Manufacturing Index is also out and is likely to show that the index weakened in October. Industrial Production data and the Federal Reserve Beige book are also released in the coming days, along with the Philly Fed Business Outlook and weekly jobless claims. Fed Chairman Jerome Powell is scheduled to speak to the Economic Club of New York on Thursday, when markets will be hanging on his every word, although he is unlikely to give too much away.
It is a busy week for UK data, kicking off with the release of the September labour market report which is expected to show that private sector wage growth is edging lower, giving some comfort to the BoE. UK CPI inflation is out on Wednesday and markets expect a further easing in September to 6.6% from 6.7%. Retail Sales data for September are released on Friday and may dip as the unseasonably warm weather delayed purchases of autumn and winter clothing. The pound remains under pressure, with support seen at 1.2150 ahead of 1.2105.
The single currency dropped on Friday against the US dollar, finding some support at 1.05 where it continues to consolidate. The final reading of September euro area CPI inflation is out on Wednesday and is expected to come in unchanged at 4.3%. An inline print should give the ECB more confidence to keep interest rates unchanged at the next policy meeting.
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