Ahead Today
G3:US CPI, Germany ZEW Expectations
Asia: India WPI
Market Highlights
The key focus of markets will be on US CPI for October. Consensus is expecting some moderation in the headline rate to 0.1% mom due to lower gasoline prices. More importantly, the core rate is expected to remain unchanged at +0.3%mom, with declines in used car prices likely to be offset in part by some increase in health insurance prices, together with some uncertainties around how owner-equivalent rentals could pan out during the month. Overall, we continue to expect US inflation to trend lower into 2024, given the lead indicators together with continued rebalancing in the US labour market. Beyond US CPI, Germany will release its Zew Expectations survey, which is expected to show some small improvement in November.
The US Dollar was marginally weaker by 0.2% on the day, US 10-year yields rose a touch to 4.65%, while risk assets such as equity markets were relatively flat.
Regional FX
Asian currencies were mixed against the Dollar, following last week’s Dollar recovery, with KRW the key outperformer (+0.37%) on the day. India released CPI numbers, which showed some moderation to 4.9%yoy (vs consensus of 4.8%yoy) in the headline rate. Meanwhile, the core inflation came down further in month to 4.2%yoy from 4.5%yoy. Overall, we expect RBI to remain on hold and keep a hawkish stance, given that growth remains relatively robust, while the external environment is not entirely conducive for emerging markets yet with the Fed keeping a hawkish tone. USDINR recently broke past the key 83.3 level, although there were reports by Reuters that RBI was seeking an explanation from a trading platform on technical glitch on FX trading as an investigation into movements in INR. We remain cautious on INR in the near-term, given rising trade deficit, soft services exports, together with slower capital flows, with RBI likely to remain in the market to cap FX volatility.
