The U.S. Dollar is trading in lower ranges after having a tough week in which it has lost over 1.5% of its value.
This week provided evidence of price growth not only fading away for consumers and suppliers but also showing signs of actual contraction leading to speculation over a timeline for deflation. Naturally, economists and business leaders are wondering if altogether this could build up to a dent in economic growth. More importantly, markets are hoping and already increasing the chances that cuts to interest rates will follow in 2024. Furthermore, U.S./China conversations bode well for a global improvement narrative.
October Housing Starts figures managed to expand when a contraction was expected. However, the figure of 1.9% is lower than the month prior. Housing and labor gauges will be closely watched for signs of economic distress as other dynamics, such as lower prices in some sectors, come into play. A few Fed speakers will give some comments today. It could move the needle to close out a negative-Buck week. Oil prices continued to dip as they are now at their weakest point since July.
What to Watch Today…
Sterling rose, but we feel its value is volatile following some surprises in economic indicators. Earlier, the release of October Retail Sales revealed a contraction of (-0.3) when an expansion of 0.4% was forecast instead. Domestic politics will also matter as the government in the U.K. looks to take credit for lowering inflation but has to cope with rather gloomy outlooks for the economy. It is important to note that at various times this year, Pound defied the odds as economic numbers proved better than anticipated.
The Euro has gained 1.8% this week following numbers that make it possible a pivot toward dovishness could arrive from the Fed into next year. Additionally, inflation in the form of the Consumer Price Index came out showing that in October prices climbed as expected by 2.9%. While America is seeing some rapid disinflation turning into deflationary pressures, it looks like the European Central Bank could maintain its record-high borrowing costs for longer than most economists thought. With stimulus in fiscal expenditures coming from Germany, a resilient economy could make way for a strengthening for the Euro to close the year.