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US dollar dips following inflation data

Wednesday, November 15, 2023

Today’s headlines

What’s happening: The US dollar moved lower on Tuesday, following the release of the latest inflation data.

What happened: US CPI data showed that the pace of inflation had moderated in October.

The latest inflation data raised prospects of the US Federal Reserve having come to the end of its monetary tightening cycle.

Why it matters: The Labor Department’s Bureau of Labor Statistics said that US consumer prices came in flat in October amid lower gasoline prices, compared to a 0.4% increase in September. The figure was also better than market expectations of a 0.1% increase.

In the 12 months through October, the US consumer price index has risen by 3.2%, down from 3.7% in September and compared to market estimates of 3.3%. The annual core consumer price inflation fell to more than a two-year low of 4% in October.

The greenback fell sharply just after the release of the inflation report, with increased speculations of the Fed not hiking its benchmark interest rates beyond the current 5.25%-5.50% range. Speculations of the US central bank beginning rate cuts in May also increased.

The US dollar index, which measures the greenback’s performance versus a basket of six peers, tumbled around 1.5% to 104.05 on Tuesday, recording its largest single-session percentage decline since November 11, 2022.

The greenback also recorded its biggest decline versus the British pound and the euro since November 2022. The EUR/USD forex pair jumped around 1.7% to 1.0880, while the GBP/USD forex pair climbed around 1.8% to 1.2500 on Tuesday.

The Japanese yen recorded limited gains versus the US dollar. The USD/JPY forex pair dipped around 0.9% to 150.37.

What to watch: Investors await the release of economic data on producer inflation and retail sales, scheduled for release on Wednesday. Producer prices in the US, which rose 0.5% month-over-month in September, are likely to rise by 0.1% in October. Analysts expect retail sales to decline by 0.3% in October, following a 0.7% increase in September.

Markets will also continue monitoring comments from Fed officials to gain more insights into the bank’s upcoming rate moves.

The markets today

The Home Depot will be in focus today following the release of quarterly results

Context: Shares of Home Depot rose on Tuesday, after the company reported better-than-expected third-quarter earnings.

Details: Home Depot reported a decline in sales of products like flooring and cabinets, as people postponed major renovations due to inflation and high interest rates. Big-ticket sales fell 5.2% from a year ago, while customer transactions declined 2.4% in the quarter.

However, the home improvement retailer recorded growth in sales for categories like plumbing and hardware.

Home Depot’s comparable sales fell 3.1%, while US comparable sales declined by 3.5%. The company’s operating margins came in at 14.3%, while operating income contracted by 12.1% to $5.4 billion.

Home Depot said total sales had declined by 3% year-over-year to $37.71 billion, which came in higher than the consensus estimates of $35.66 billion. The company reported earnings of $3.81 per share, down 10.1% from the year-ago period, but exceeding Wall Street expectations of $3.58 per share.

To boost transactions, Home Depot has already started its Black Friday sales, which will continue through November 29. The retailer is offering huge discounts on home improvement products, appliances, power tools, holiday essentials and decorations.

Home Depot updated its annual sales forecast to a decline of 3%-4%, versus its earlier outlook of 2%-5%. Management also guided to a decline in earnings of 9%-11%, compared to their previous projections of 7%-13%.

How shares responded: Home Depot’s shares climbed 5.4% to close at $303.63 on Tuesday, after the release of quarterly results. The stock has lost around 4% year to date.

What to watch: Investors will watch inflation data, which is expected to significantly impact consumer disposable income and overall spend. Markets will also monitor Home Depot’s performance during the Thanksgiving weekend and the holiday season.

Other Markets: European indices closed higher on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.20%, 1.76%, 1.39% and 1.34%, respectively.

The news shaping the markets

Ukrainian news outlet Ukrainska Pravda said the country’s Ministry of Defense was looking to dismiss three commanders of the armed forces. The news sent the RUB/USD forex pair higher.


China’s retail sales grew by 7.6% year-over-year in October, accelerating from 5.5% in the previous month. The figure also topped market expectations of 7.0% and lent support to the CNY/USD forex pair.


New Zealand’s number of visitor arrivals surged by 48.7% year-over-year to 224,900 in September, which sent the NZD/USD pair higher in forex trading this morning.


The Japanese economy contracted 0.5% in the third quarter. This being worse than market estimates of a 0.1% decline exerted pressure on the JPY/USD forex pair.


South Korea’s adjusted unemployment rate edged lower to 2.5% in October, from 2.6% in the prior month, which sent the KRW/USD pair higher in forex trading this morning.

What else to watch today

Saudi Arabia’s inflation rate and wholesale prices, France’s unemployment rate, Germany’s wholesale prices, UK’s inflation rate, producer prices change and retail price index, France’s consumer price inflation, Eurozone’s balance of trade, industrial production and ECB non-monetary policy meeting, Turkey’s central government budget balance, Italy’s inflation rate, South Africa’s retail trade, India’s money supply M3 and balance of trade, US MBA mortgage applications, NY Empire State manufacturing index, business inventories, crude oil inventories, stocks of gasoline and distillate stocks, Canada’s manufacturing sales, Russia’s gross domestic product, as well as Spain’s consumer confidence indicator.


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