During today's Asian trading, the US dollar rose against major currencies, returning to last week's high, while participants await the publication of new US data and statements from a variety of Fed policymakers, including Chairman Jerome Powell, that will provide clues about the interest rate path.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.3% to 105.30. Overall, trading was light with U.S. bond markets closed for a public holiday, though stocks and futures are open. Last week, the index gained 0.69%, supported by Donald Trump's election victory. As for the data, the consumer price index for October will be presented on Wednesday, and the producer price index for October will be released on Thursday. Economists expect the CPI to grow by 2.4% per annum, as in September, while the growth of the core CPI stabilized at 0.3% m/m. If the data exceeds forecasts, it will reduce the likelihood of another Fed rate cut at the December meeting. According to the CME FedWatch Tool, markets see a 64.9% probability of a 0.25% rate cut in December (compared to 79.6% a week earlier).
The Chinese yuan declined by 0.13% against the US dollar, reaching its lowest level since August 2 on the back of weak Chinese data and Beijing's latest disappointing stimulus package. The official data showed that the economy still faces the risk of slipping into a deflationary trap. CPI growth slowed to 0.3% per annum in October from 0.4% per annum in September. Moreover, this was the weakest in four months. Economists had expected an increase of 0.4% per annum. Core CPI that excludes prices of food and energy rose to 0.2% per annum from 0.1% per annum in September. Meanwhile, the producer price index fell by 2.9% per annum after falling by 2.8% per annum in September. Consensus estimates suggested a decrease of 2.5% per annum. Overall, inflation data suggests that recent stimulus efforts are having some effect, but the government has not revealed any concrete plans for a major fiscal expansion next year without which the economy risks slipping deeper into deflation. This week, investors will focus on retail sales and industrial production data, which will assess whether Beijing's various attempts to stimulate the economy have any real impact on demand.