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Early Morning Call: USD steady as Fed not 'softening' fight against inflation

Federal Reserve board member, Christopher Waller, says last week's CPI print was "just a data point" and in no way proof that inflation is slowing.

Indices overview

Indices in Europe are set to open in positive territory this morning, after what has been a mixed session in the Asia Pacific region. The Nikkei and ASX 200 lost ground, while the Hang Seng rally continues after two weeks of strong gains.

US indices posted substantial weekly gains, boosted by softer-than-expected US CPI data, while the US Dollar Basket lost 3.6% in two sessions.

Yesterday Federal Reserve (Fed) board member, Christopher Waller, said that last week's CPI print was "just a data point" and in no way proof that inflation is slowing. If Waller admitted that the Fed could now start thinking about slowing the pace of its hikes, he reiterated that the central bank was not softening its fight against inflation.

Macro indicators

In terms of macroeconomic indicators, at 10:00 we expect the latest eurozone industrial production data. Economists expect the index to rise by 0.3% for the month of September compared to August, and a gain of 3% compared to September last year.

The pound will be tested throughout the week. Jobs data is scheduled to be released tomorrow. But more importantly, currency traders are gearing up for Wednesday’s consumer price index (CPI). Economists forecast a new four-decade high of 10.6% in October year-on-year (YoY), after 10.1% the previous month.

On Thursday the Chancellor of the Exchequer will present his Autunm fiscal statement. And on Friday, we await retail sales for the month of October.

Earnings

A few big corporate names report earnings this week in the UK, starting tomorrow with Vodafone and Imperial Brands, followed on Thursday by International Distribution Services and Burberry.

In the US, it was announced on Friday afternoon that Estee Lauder has entered exclusive talks to buy Tom Ford for $2.8 billion, beating out competition. Earlier this month, French luxury group Kering was also in discussions to acquire Tom Ford. Estee Lauder stock rose on the news as investors believe the transaction will help the group strengthen its position in the luxury business.

This week, retailers are taking centre stage. Walmart reports its quarterly earnings tomorrow at lunchtime. Analysts forecast earnings of $1.31 per share, which represents a 9.7% decline on the same quarter a year ago. Revenue is expected to rise by some 5% to $147.18nn year-on-year.

Also expected this week, Home Depot tomorrow and Target on Wednesday.

Some big names in the tech sector report this week as well. NVIDIA is set to post earnings per share (EPS) of 70 cents on Wednesday after the closing bell. Revenue is forecast at $5.8bn. Last week NVIDIA was among the best performing on the US market. On Monday, investors welcomed the announcement that the group is now offering a new advanced chip in China that meets recent export control rules. And on Thursday, NVIDIA shares rose in excess if 15% after the release of lower-than-expected US CPI data.

Cisco is also expected to report on Wednesday evening.

Commodities

Oil prices are little changed this morning.

Last Friday a Baker Hughes survey showed that the total rig count rose by nine to 779, entirely accountable to the number of rigs in operation, up from 613 to 622. The number of producing gas rigs remained at 157.


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