How fast is US inflation falling?

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A series of strong economic data persuaded investors to move away from the US central bank’s suggestions that the Federal Reserve would only gradually cut interest rates in the coming months. Next week’s inflation numbers mark the next point to shape investor thinking.

Consumer price inflation data is due on Thursday, and producer price figures are due on Friday. Ahead of both, minutes from the Federal Reserve’s September meeting due on Wednesday should reveal more about the debate that led the bank’s rate-setting committee to cut interest rates by half a percentage point in its first split decision from almost two decades.

A depleted payrolls report last week showed the U.S. added 240,000 jobs in September, far more than forecast, and pushing futures to imply about a 90 percent chance the Federal Reserve will cut interest rates just by a quarter of a point when it meets in early November.

Thursday’s consumer price index is expected to support this, with only modest price pressures seen last month. The core index – excluding volatile food and energy – is expected to have risen 0.2% month-on-month, according to economists polled by Reuters, while the primary reading is expected to have risen 0.1% on the same basis. Year on year, that would put the two at 3.2% and 2.3% respectively, Barclays analysts estimate.

“The inflation results, in line with our forecasts, should bolster (the Fed’s) confidence that the disinflation process is intact and would likely keep the focus on upcoming labor market data and other activity indicators,” U.S. economist Pooja Sriram wrote in -a note for customers. . Jennifer Hughes

Is the yen trading back?

An unexpected interest rate hike in August led to a dramatic unwinding of the so-called yen carry trade, in which investors and speculators borrow yen to fund trades in higher-yielding currencies and assets.

Comments by incoming Japanese Prime Minister Shigeru Ishiba suggesting the economy is not ready for further rate hikes were seen by some investors as a sign it was safe to re-enter trade.

The yen fell nearly 3 percent last week to 146 yen to the U.S. dollar, sparking a small rally in Japanese stocks, particularly companies with large exports that benefit from a weaker currency.

“Investors took these comments as a green light to rebuild the shipping exchange,” said Wei Li, head of China multi-asset investments at BNP Paribas.

“We are in a risk-on environment,” he said, adding that demand to borrow yen to fund riskier deals is returning as confidence in the U.S. economy remains strong.

Tomochika Kitaoka, Nomura’s chief equity strategist in Japan, warned that the data behind investors piling back into the carry trade was “imperfect”, adding that there was evidence that some hedge funds had returned to net short positions in yen.

“Before Japan’s snap election (on Oct. 27), it’s a relatively safe window to review the shipping deal,” Li added. Arjun Neil Alim

Is the UK economy growing again?

The UK economy is expected to return to growth in August after two months of stagnation, according to official data released on Friday.

The robust expansion of the UK economy at the start of the year strengthened the case for a gradual approach to cutting interest rates until clearer signs of a slowdown in high inflation in the services sector. In August, services inflation rose to 5.6% from 5.2% in the previous month.

However, economic growth in the second quarter was revised down to 0.5%, marking a slowdown from 0.7% in the previous quarter. Incoming data suggests growth may slow to 0.3% in the third quarter, but August figures will provide more clarity. Economists polled by Reuters expect GDP to rise 0.2 percent month-on-month in August.

Last week, the governor of the Bank of England said the bank’s rate-setters could be “a bit more aggressive” in reducing borrowing costs. However, the BoE’s chief economists warned against rapid rate cuts, saying: “It will be important to guard against the risk of cutting rates either too much or too quickly” and warned of a “gradual withdrawal”.

Ellie Henderson, economist at Investec, is more optimistic than the consensus, expecting a rebound in retail sales and the absence of doctors’ strikes to fuel a 0.3% expansion.

She said that while activity in the fall could be temporarily depressed due to households and businesses holding back on large purchases and investments ahead of the Oct. 30 budget, the easing cycle of monetary policy and strong growth in real disposable income of households will “continue to support. economic impulse”. Valentine of Rome