Aussie, US inflation in focus
Global FX markets were mostly cautious overnight ahead of key inflation data from Australia, US and China over the next few days.
The US dollar was higher while the Australian dollar fell ahead of this week’s key inflation data for both countries.
In Australia, inflation is forecast to fall from 4.9% in October to 4.4% in November. If so, this will be the lowest level in almost two years and will make further Reserve Bank of Australia rate hikes less likely.
Australian inflation is due at 11.30am AEDT today.
US inflation is due Thursday evening with markets also looking for a fall with core inflation forecast to drop from 4.0% to 3.8% — the lowest level since May 2021.
Euro weaker as slowdown weighs
In Europe, whether we look at the PMIs, BdF, or Insee surveys, French manufacturing surveys were very dismal in November.
Indeed, the industrial sector has been contracting since August, and we anticipate that this trend will continue in November.
As a result, we anticipate 0.5% m-o-m loss in November industrial production, resulting in 1.1% q-o-q decline in Q4 industrial output and a -0.2pp contribution to headline GDP growth in Q4 2023, in line with our recession projection.
The euro was weaker again overnight with the EUR/USD falling 0.2%.
NOK’s rally pauses in line with broader FX
The Norwegian krone has charted a similar path to other G10 currencies with a recent rally versus the US dollar pushing the NOK to a four-month high versus the greenback.
This week, Norwegian CPI inflation is forecast to dip from 4.8% to 4.7%. We also estimate CPI-ATE inflation to decline from 5.8% to 5.5%, which is 0.1 percentage point lower than Norges Bank’s prediction.
According to Nord Pool’s high frequency data, electricity costs could fall a little in December, while gasoline prices should fall significantly.
Seasonality in the first quarter and lower FX purchases by Norges Bank strengthen NOK, while domestic GDP, commodity prices, and valuations provide a counterbalance.
USD stronger ahead of CPI
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 8 – 13 January
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
