Forex Signals Brief October 20: UK and Canadian Retail Sales Close the Week

Yesterday was the day that 10-year rates almsot reached 5% several times? Early in the morning we had the emplohyment report from Australia which only showed some small gains in new jobs, not helping the AUD much, with risk sentiment remaining on the defensive, hence the bullish momentum in US treasiurt yields.

US weekly first jobless claims came later on, and were 198K, compared to 212K predicted. This is the beast reading since early January which sent 10-year rates close to 5% for a second time Although the unemployment claims declined again. Forward indications of sales continue to show a plunge as mortgage applications fall to a 26-year low and 30-year fixed rates hit 8%.

In the evening we had a number of FED members holding speeches with the Federal Reserve Chairman Powell speaking at the Economic Club of New York. He said that the FOMC is “moving cautiously” and there are more indications of above-trend growth or that the labor market is no longer softening might justify more rate increases. That sent risk trades bumping higher, but that faded after geopolitical risks increased, sending risk assets lower again to close the day.

Today starts with the inflation report from Japan, with Core CPI Y/Y predicted to be 2.7%, down from 3.1% before, although there is currently no consensus on the Core-Core number and the Headline CPI, which were previously 4.3% and 3.2%, respectively. The Tokyo CPI, which is considered a leading indicator for national CPI, recently disappointed, and while the Bank of Japan will revise its inflation forecasts higher, they are unlikely to normalize monetary policy unless they see sustained wage growth or large upside surprises in inflation data.

Following that are UK and Canadian Retail Sales. In terms of current consumption data, BRC Y/Y retail sales increased 2.8% in September (formerly 4.3%), with the consultant observing that “sales growth slowed in September as the high cost of living continues to bear down on households.” Furniture and electronics did poorly as customers cut back on spending in response to rising housing, rental, and gasoline prices.” “It was nice to see consumers return to the high street and make the most of the warm weather in early September,” said the Barclaycard consumer spending statement.