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Weekly Market Review 09-15/11/2015

The Indicators to Watch: Inflation, Wages, Retail Sales

This week, once again, investors will have to divide their attention between the United Kingdom and the United States. On Tuesday, Sterling and FTSE100 traders will be scrutinizing the Inflation Report Hearings. Then on Wednesday, the UK Office of National Statistics (ONS) will release unemployment and labor data. Finally, on Friday, a hop across the pond takes us to America when the US Census Bureau releases retail sales figures for October. As the US economy is generally consumer-driven, retail sales can be critical to help assess Federal Reserve Bank policy.

BoE’s Mark Carney in the Hot Seat

On Tuesday, the Inflation Report Hearings will take place in the UK Parliament. This is an annual event organized by the UK Treasury which is tasked with examining the administration, policies and expenditures of finance-related public entities. That, of course, includes the Bank of England, and Mark Carney, as the head of the BoE, will be required to testify.

What is a major concern for Sterling and FTSE100 traders is how the Bank of England perceives inflation in the future. It is anticipated that the BoE Governor will continue to sound upbeat on the inflation outlook. In the proverbial “hot seat” Mark Carney is likely to reiterate that UK inflation does appear to be stabilizing, despite of global growth concerns.

Labor and Wages Could Sway a Policy Change

On Wednesday, the ONS will release several pieces of key unemployment and wage data. That information is critical to the Bank of England in crafting monetary policy. Like the US, the UK economy is largely driven by consumer. A larger British workforce and a rise in earnings and wages typically translate into increased spending. That, of course, helps push UK GDP higher. And coming full circle, wage growth is critical to inflation. If the labor and wages data shows across-the-board improvement that helps make the case for a more hawkish BoE. With the BoE weighing the merits of a rate hike, any data that supports it will be positive for Sterling.

Will US Retail Sales Finally Rebound?

On Friday, US retail sales figures will be released for the month of October. Over the past several months, those numbers have been generally disappointing. Now, investors are craving a rebound. A beat on the figures will prove that the US consumer is back, cash in hand, and hitting the stores. September’s retail sales figures disappointed and surprised, rising only a paltry 0.1%. Analysts had then forecast a rise to 0.2%, given the back-to-school sales. That disappointment makes this release all the more important. If October’s figures beat estimates, that would provide a boost to the S&P500 and the DJIA. Conversely, another disappointment could hit Wall Street hard.

Down to Business

What FTSE100 and Sterling investors want to hear, primarily, all revolves around the Bank of England. An upbeat Mark Carney sends the signal that a rate hike could still be on the table. Improvement in UK labor and wages data would also factor into a more hawkish BoE. In the US, a jump in retail sales would help propel Wall Street indices higher.

On the Plate

UK inflation Report Hearings(Tuesday)- If Mark Carney the BoE governor will voice a hawkish stance in the hearings , Sterling could rally.

BoE Governor Speech(Wednesday)- As with the inflation hearings, a hawkish stance from Carney will propel the Sterling higher.

Australian Unemployment(Thursday)- If Aussie unemployment unexpectedly jumps the Aussie could be hit.

Eurozone Q3 GDP Growth(Friday)- This figure will be highly watched by EURUSD traders. If Eurozone GDP growth beats estimates the Euro could get a surprise rebound and catch most traders off guard.

But, if Eurozone growth comes across as weak , it will validate the consensus estimate that Mario Draghi might expand its current QE program . Under this scenario , the EURUSD could plunge closer into parity.

US Retail Sales(Friday)- This release will be watched closely by Wall Street. After several months of weak retail sales, Wall Street bulls want to see the US consumer returning with a higher retail sales. A disappointment could therefor weigh on Indices such as the S&P500 and the Dow Jones Industrial Average.

Chart of the week:

Disney chart



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