Balance is returning to markets ahead of important economic data in the US.
After US inflation figures came out last week and showed a noticeable slowdown, positive sentiment surged, which led to an increase in risk appetite and strong pressure on dollar. However, some Fed members ramped up verbal pressure, stating that it is necessary to continue actively raising interest rates. This led to some cooling of the positive mood among investors, which became the reason for increased volatility in markets.
Of course, even though negative Fed statements influenced market sentiment, they are unlikely to significantly change if the retail sales data in the US turn out to be higher than expected. In fact, markets are currently waiting for confirmation that the US economy continues to slide on the border with a recession, maintaining a generally positive state, as indicated by the situation in the labor market and recent GDP figures. Also, according to forecasts, the core retail sales index in October should add 0.5% against the September increase of 0.1%. Retail sales, meanwhile, will grow significantly, by 0.9% versus 0.0% a month earlier. If the numbers do not disappoint, rally will resume in stock markets, while dollar and Treasury yields will decrease.
This market reaction is explained by the fact that a growth in sales will characterize the improvement in the situation in the US economy, which will be another reason for the Fed to stop tightening its policy.
Forecasts for today:
EUR/USD
The pair is consolidating above 1.0300 in anticipation of the 3rd quarter GDP data for the eurozone. If the figure declines sharply, pressure will return on euro, which will lead to a fall below 1.0300 and move towards 1.0235. Quotes will rise only amid positive data on US retail sales.
AUD/USD
The pair is testing 0.6725 on the wave of growth in Chinese stock indices. If it overcomes this mark and consolidates above it, price will rise to 0.6900.
