• Dollar retreats as Fed officials refrain adding new hints on Dec. rate hike Several Bank officials spoke on Thursday and the bottom line was held unchanged, the Fed is most likely headed towards its first rate increase in almost a decade, while the ECB is preparing more measures to boost the Eurozone’s recovery. ECB President Draghi noted that the downside risks stemming from global growth and trade are “clearly visible” underlining the Bank’s readiness to unleash further stimulus measures at its meeting next month. On the other side of Atlantic, Fed officials refrained from adding fresh hints regarding December rate hike, with Fed Chair Yellen not even commenting on monetary policy. I believe that the most notable comment came from New York Fed President William Dudley who said that the risks of moving too quickly vs too slowly are nearly balanced. The importance of his assessment comes from the fact that he has been cautious to comment on raising rates and now it seems that more Fed officials are been lined up behind a December rate hike.
• The greenback retreated against its major counterparts as the market was eager for reassurance and stronger signs that the Fed will raise rates at its December meeting. As a result, it has become more sensitive to dovish and neutral comments than hawkish remarks. We have made the case several times that USD is data-driven and that significant positive US data surprises are now required to keep the Fed on track to raise rates and USD to gain further. What is more, with the market currently pricing around 70% rate liftoff in December, it will need fresh communicate from Fed officials to signal a greater probability of hiking as we go into next month’s meeting.
• Today’s highlights: The preliminary GDP data for Q3 from Italy and Eurozone as a whole are due to be released. Eurozone’s preliminary GDP is expected to have risen at the same pace as in Q2, while figures released from Germany and France earlier, were in line with market consensus. The market reaction was muted on the news
• In the US, headline retail sales are expected to have accelerated in October, while retail sales excluding autos and gasoline are estimated to have risen after staying unchanged in September. Further improvement in retail sales could suggest a pick-up in growth for Q4 and could strengthen the greenback further. We also get the PPI data for October. The headline rate is forecast to have declined further into negative territory, while the core figure, excluding food and energy, is expected to have slowed. These data increase the likelihood of a negative surprise in the CPI prints coming out next week. The headline CPI rate is currently at 0.0% yoy with expectations at +0.1% yoy. A possible disappointment in the PPI could leave the CPI rate unchanged. The preliminary U of M consumer sentiment index for November is also coming out along with the surveys of 1-year and 5-to-10 year inflation expectations.
• As for the speakers, ECB Vice-President Vitor Constancio, ECB executive Board member Yves Mersch, and Cleveland Fed President Loretta Mester speak.