This Week’s Market Focus is on U.S. Economic Trends: Today, U.S. Housing Starts and the Michigan Consumer Sentiment Index are in the Spotlight

This Week’s Market Focus is on U.S. Economic Trends: Today, U.S. Housing Starts and the Michigan Consumer Sentiment Index are in the Spotlight

This week, the market is intensely focused on U.S. economic trends. While the major U.S. inflation indicators—Producer Price Index (PPI) and Consumer Price Index (CPI)—showed mixed signals, overall, they indicated signs of easing inflation, leading to a relatively calm market reaction.

On the other hand, yesterday’s U.S. retail sales and initial jobless claims surprised to the upside, prompting a significant market response. Retail sales exceeded expectations, and jobless claims decreased for the second consecutive week. This has gradually shifted sentiment from last week’s pessimistic outlook, with the September rate cut expectations now leaning from 50 basis points towards 25 basis points.

Concerns about a hard landing for the U.S. economy have eased, leading to a significant rally in the U.S. stock market, increased dollar buying in the forex market, and a strengthening of risk appetite, which has resulted in yen selling. The USD/JPY briefly reached the 149 level, while EUR/USD dropped below 1.10, reflecting the dollar’s strong performance. GBP/USD maintained its position in the 1.28 range, influenced by the rise in GBP/JPY, which climbed to around 192 yen, and EUR/JPY rose to the upper 163 yen range.

Today, the market will focus on the release of U.S. housing starts (July) and the preliminary Michigan Consumer Sentiment Index (August). Housing starts are expected to decrease from the previous month, while the Michigan Index is forecasted to improve. Unless these indicators show extreme results, market reactions are likely to remain subdued. With the weekend approaching, there could also be some adjustment to yesterday’s dollar strength.

Additionally, Canada’s housing starts (July), international securities transactions (June), and manufacturing sales (June) will also be released. Chicago Fed President Austan Goolsbee is scheduled to participate in a discussion, and his comments will be closely watched.

The U.S. dollar is currently not forming any major trends, with a continuation of range-bound trading. While there may be movement in the U.S. dollar following the release of the Michigan Consumer Sentiment Index, it is expected that there will not be a significant trend change.