Pound May Extend Drop on Claims Data, US Dollar Focused on Fed Outlook

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" style="text-align:justify"> Talking Points:

Pound May Extend Drop if Soft Jobless Claims Data Undercuts BOE Outlook
US Dollar Looks to Retail Sales PPI and Beige Book for Fed Rate Hike Bets
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UK Jobless Claims numbers headline the economic calendar in European trading hours. A 35k drop is expected marking the smallest drawdown in four months. UK news-flow has increasingly underperformed relative to consensus forecasts since mid-September (according to data from Citigroup). Meanwhile leading surveys suggest the pace of improvement in the labor market has markedly slowed compared with the first half of the year. Collectively this opens the door for a downside surprise that may further erode BOE rate hike expectations and compound pressure on the British Pound. We remain short GBPUSD.

Later in the day the spotlight turns to US event risk where September’s Retail Sales and PPI figures are on tap. Receipts are expected to fall 0.1 percent compared with the prior month while wholesale inflation is seen holding steady at a year-on-year rate of 1.8 percent. Separately the Federal Reserve will publish its Beige Book survey of regional economic conditions.

Realized US economic data outcomes have cautiously improved relative to expectations over recent weeks. More of the same this time around coupled with an absence of particularly negative surprises in the Beige Book may reboot Fed rate hike bets sending the US Dollar higher. Risk-geared currencies like the Australian and New Zealand Dollars may suffer most in such a scenario as the prospect of stimulus withdrawal amplifies already building global slowdown worries.

The Aussie recovered from overnight lows after September’s Chinese CPI data registered softer than economists expected. The benchmark year-on-year inflation rate slowed to 1.6 percent coming in below forecasts calling for a 1.7 percent result and marking the weakest price growth in close to five years. A soft CPI print that potentially paves the way for an expansion of Chinese stimulus efforts as growth decelerates. That would bode well for Australian exporters who count on China as their top customer.

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Asia Session

" style="text-align:center"> GMT	" style="text-align:center"> CCY	" style="text-align:center"> EVENT	" style="text-align:center"> ACT	" style="text-align:center"> EXP	" style="text-align:center"> PREV
" style="text-align:center"> 23:30	" style="text-align:center"> AUD	Westpac Consumer Conf Index (OCT)	" style="text-align:center"> 94.8	" style="text-align:center"> -	" style="text-align:center"> 94.0
" style="text-align:center"> 23:30	" style="text-align:center"> AUD	Westpac Consumer Conf Index (YoY) (OCT)	" style="text-align:center"> 0.9%	" style="text-align:center"> -	" style="text-align:center"> -4.6%
" style="text-align:center"> 0:30	" style="text-align:center"> AUD	New Motor Vehicle Sales (YoY) (SEP)	" style="text-align:center"> 0.8%	" style="text-align:center"> -	" style="text-align:center"> -3.5%
" style="text-align:center"> 0:30	" style="text-align:center"> AUD	New Motor Vehicle Sales (MoM) (SEP)	" style="text-align:center"> 2.9%	" style="text-align:center"> -	" style="text-align:center"> -1.6%
" style="text-align:center"> 1:30	" style="text-align:center"> CNY	Producer Price Index (YoY) (SEP)	" style="text-align:center"> -1.8%	" style="text-align:center"> -1.6%	" style="text-align:center"> -1.2%
" style="text-align:center"> 1:30	" style="text-align:center"> CNY	Consumer Price Index (YoY) (SEP)	" style="text-align:center"> 1.6%	" style="text-align:center"> 1.7%	" style="text-align:center"> 2.0%
" style="text-align:center"> 4:30	" style="text-align:center"> JPY	Industrial Production (MoM) (AUG F)		" style="text-align:center"> -	" style="text-align:center"> -1.5%
" style="text-align:center"> 4:30	" style="text-align:center"> JPY	Industrial Production (YoY) (AUG F)		" style="text-align:center"> -	" style="text-align:center"> -2.9%
" style="text-align:center"> 4:30	" style="text-align:center"> JPY	Capacity Utilization (MoM) (AUG)		" style="text-align:center"> -	" style="text-align:center"> -0.8%
" style="text-align:center"> 6:00	" style="text-align:center"> JPY	Machine Tool Orders (YoY) (SEP F)		" style="text-align:center"> -	" style="text-align:center"> 34.8%

European Session

" style="text-align:center"> GMT	" style="text-align:center"> CCY	" style="text-align:center"> EVENT	" style="text-align:center"> EXP	" style="text-align:center"> PREV	" style="text-align:center"> IMPACT
" style="text-align:center"> 6:00	" style="text-align:center"> EUR	German CPI (MoM) (SEP F)	" style="text-align:center"> 0.0%	" style="text-align:center"> 0.0%	" style="text-align:center"> Medium
" style="text-align:center"> 6:00	" style="text-align:center"> EUR	German CPI (YoY) (SEP F)	" style="text-align:center"> 0.8%	" style="text-align:center"> 0.8%	" style="text-align:center"> Medium
" style="text-align:center"> 6:00	" style="text-align:center"> EUR	German CPI – EU Harmonized (MoM) (SEP F)	" style="text-align:center"> 0.0%	" style="text-align:center"> 0.0%	" style="text-align:center"> Medium
" style="text-align:center"> 6:00	" style="text-align:center"> EUR	German CPI – EU Harmonized (YoY) (SEP F)	" style="text-align:center"> 0.8%	" style="text-align:center"> 0.8%	" style="text-align:center"> Medium
" style="text-align:center"> 7:00	" style="text-align:center"> EUR	ECB President Draghi Speaks in Frankfurt	" style="text-align:center"> -	" style="text-align:center"> -	" style="text-align:center"> Low
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	Jobless Claims Change (SEP)	" style="text-align:center"> -35.0K	" style="text-align:center"> -37.2K	" style="text-align:center"> Medium
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	Claimant Count Rate (SEP)	" style="text-align:center"> 2.8%	" style="text-align:center"> 2.9%	" style="text-align:center"> Medium
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	ILO Unemployment Rate (3M) (AUG)	" style="text-align:center"> 6.1%	" style="text-align:center"> 6.2%	" style="text-align:center"> Medium
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	Average Weekly Earnings (3M/Y) (AUG)	" style="text-align:center"> 0.7%	" style="text-align:center"> 0.6%	" style="text-align:center"> Low
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	Weekly Earnings ex Bonus (3M/Y) (AUG)	" style="text-align:center"> 0.8%	" style="text-align:center"> 0.7%	" style="text-align:center"> Low
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	Employment Change (3M/3M) (AUG)	" style="text-align:center"> 30K	" style="text-align:center"> 74K	" style="text-align:center"> Low
" style="text-align:center"> 9:00	" style="text-align:center"> CHF	Credit Suisse ZEW Survey (OCT)	" style="text-align:center"> -	" style="text-align:center"> -7.7	" style="text-align:center"> Low

Critical Levels

" style="text-align:center"> CCY	" style="text-align:center"> Supp 3	" style="text-align:center"> Supp 2	" style="text-align:center"> Supp 1	" style="text-align:center"> Pivot Point	" style="text-align:center"> Res 1	" style="text-align:center"> Res 2	" style="text-align:center"> Res 3
" style="text-align:center"> EURUSD	" style="text-align:center"> 1.2433	" style="text-align:center"> 1.2561	" style="text-align:center"> 1.2609	" style="text-align:center"> 1.2689	" style="text-align:center"> 1.2737	" style="text-align:center"> 1.2817	" style="text-align:center"> 1.2945
" style="text-align:center"> GBPUSD	" style="text-align:center"> 1.5567	" style="text-align:center"> 1.5767	" style="text-align:center"> 1.5835	" style="text-align:center"> 1.5967	" style="text-align:center"> 1.6035	" style="text-align:center"> 1.6167	" style="text-align:center"> 1.6367

" style="text-align:justify"> --- Written by Ilya Spivak Currency Strategist for DailyFX.com

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" style="text-align:justify"> Contact and follow Ilya on Twitter: @IlyaSpivak

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