Week Ahead: Easing CPI could boost gold higher after NFP miss
Before we consider the week ahead, lets first digest the just-released US nonfarm payrolls.
It was another big miss with the official print coming in at 194k, much lower than the forecasted 500k figure. There was however an upward revision to the August data from 235k to 366k. The unemployment rate fell by 0.3 percentage points down to 4.8%, but the average hourly earnings ticked higher by 0.6% compared to the month prior.
As an initial reaction, the dollar pushed lower as Treasury yields declined. Spot gold prices are recovering towards the immediate resistance line around $1778, which is where a key Fibonacci retracement level as well as its 50-day moving average currently reside.
This September US jobs report is set to colour market expectations for the coming week’s inflation report, as the data portends to the Fed’s intentions for tapering.
Here are the scheduled economic data releases and events for the coming week:
Monday, October 11
- US bond markets closed
- IMF/World Bank annual meetings
- USD: Fed speak - Chicago Fed President Charles Evans
Tuesday, October 12
- AUD: Australia September business conditions and confidence
- GBP: UK August unemployment, September jobless claims
- EUR: Germany October ZEW survey expectations
- USD: Fed speak - Atlanta Fed President Raphael Bostic
Wednesday, October 13
- AUD: Australia October consumer confidence
- CNH: China September external trade
- EUR: Germany September CPI
- GBP: UK August industrial and manufacturing production
- EUR: Eurozone August industrial production
- Brent oil: OPEC monthly market report and IEA World Energy Outlook
- USD: US September FOMC minutes and CPI
Thursday, October 14
- AUD: Australia September unemployment, October consumer inflation expectations
- CNH: China September PPI and CPI
- JPY: Japan August industrial production
- USD: US weekly initial jobless claims
- US crude: EIA crude oil inventory report and IEA monthly market report
Friday, October 15
- USD: US September retail sales, October empire manufacturing and consumer sentiment
Should the consumer price index exceed the expected 5.3% year-on-year growth, that would suggest a ramp up in US inflationary pressures, which in turn could hasten the pace of the Fed’s unwinding of its asset purchases and bring forward plans for a US rate hike.
Such an outlook could translate into more dollar strength and help unwind some of the immediate declines in the DXY following the latest US jobs report.
However, if the CPI shows that consumer prices are moderating, that could allow dollar bears more breathing space and extend its declines. Still, the greenback's downside remains capped, considering that the Fed is already well down this path towards tapering, with half of the FOMC also pencilling in at least one rate hike in 2022.
Oil prices could take cues from OPEC, IEA outlooks
Brent has been reluctant to push significantly higher past $82/bbl for the time being, though still remains on course to post its seventh straight week of gains. However, with momentum pointing northwards and other technical indicators yet to signal alarmingly overbought conditions, there could be more immediate gains to be had before a technical pullback is due.
Oil bulls could also be emboldened by the monthly market outlooks out of the likes of OPEC and the IEA in the coming week.
Should either of these international entities publish a more bullish outlook, underpinned by market conditions that are tightening further, that could spur another leg higher for oil benchmarks.