This week, the market’s attention is focused on the US consumer price index on the 10th. There are also speculations about the slowdown in the pace of US interest rate hikes and the timing of future rate cuts. On the other hand, raising the terminal rate is also a hot topic. Amid mixed strengths and weaknesses, it seems that the time has come to be aware of a turning point in US monetary policy. Among them, last weekend’s U.S. employment statistics showed that the market reacted to the worsening unemployment rate while employment growth remained stable.
And the most notable is the US inflation trend. The current market forecast is for growth to slow down from +8.2% in the previous year to +7.9% on a year-on-year basis. The core year-on-year growth rate is expected to slow down slightly to +6.5% from the previous +6.6%. As a trend, it has slowed down for three consecutive months after recording +9.1% year-on-year in June. On the other hand, the core year-on-year rate of +6.6% was the highest level recorded in the previous survey, and even if there is a slight slowdown, the level itself will continue to be high. Secondary ripple effects are becoming a reality. Dollar selling is likely to intensify if there is a clear indication of a slowdown in core inflation. However, the market is often sensitive to even the slightest deviation from market expectations. It is undeniable that market trends will depend on the results. Regarding the announcement, we would like to pay attention to the volatile market development.
Prior to that, the US midterm elections will be voted in today. The predominance of the Republican Party has been reported in advance, increasing the possibility of a twist in the House and Senate, and a twist between the Democratic administration and Congress. It has been pointed out that it may be difficult for Congress to pass the economic support measures along with the inflation response of the Biden administration. US stocks are being bought in advance on the reading that it will be less likely to lead to inflation. The first step is to check the results.
Consumer Price Index (CPI) Thursday. Based on these numbers, we expect the USD to move significantly, and we assume that tomorrow will be even more nervous. Basically, we are attacking with a USD selling perspective, but we plan to wait and see from tomorrow.