The US economic schedule looks relatively light this week, but there are still some things to watch. For example, US retail sales data for September will be released on Thursday. Analysts predict that this data may increase by 0.3%, which is relatively mild compared with the 0.1% increase in August. The range of forecasts for this data is roughly between 0.7% and 0.0%. Excluding auto sales, core retail sales are expected to increase from 0.1% in August to 0.2%, with forecasts ranging from 0.4% to -0.2%.
If the data released this week is better than expected, especially if it reaches or exceeds the upper limit of the forecast, it may be good news for the US dollar. The US dollar index recently broke through the main resistance level of 102.78 on the daily chart and retested this area as support. If there is no obvious resistance next, the US dollar may continue to rise and may even approach the 200-day simple moving average, which is now around 103.75.
In addition to the retail sales data, there are other data releases, such as the New York and Philadelphia Fed will release their regional manufacturing surveys on Monday and Thursday respectively.
Turning to Europe, the ECB is widely expected to cut interest rates by 25 basis points on Thursday, bringing the deposit rate to 3.25%, as CPI inflation data is weak and economic growth indicators are not strong enough. Investors have now fully anticipated this rate cut and are expecting another 25 basis point cut at the December meeting. This week's rate cut will follow the June and September rate cuts.
The manufacturing and services PMI data for September were generally weak, which brought the composite PMI output index down to 48.9 from 51.0 in August, a drop of 9.4%. The headline CPI inflation rate fell to 1.8% in September, which is below the central bank's 2.0% target and the lowest level since April 2021. The slowdown in inflation was mainly driven by falling energy prices. In addition, the core inflation rate (excluding energy, food and tobacco) fell by 0.1 percentage point to 2.7% in September, and the service inflation rate fell to 4.0% from 4.1% in August.
Because the impact of the rate cut has been fully reflected in the price, investors now need to focus on what the ECB might do next, how much the interest rate will be reduced, and how fast it will be reduced. Therefore, it is very important to monitor the guidance of the ECB.