US retail sales data and UK job report in focus

While the US dollar index struggles to hold its 95-point level on Monday, investors are waiting for ECB president Christine Lagarde’s speech before the European Parliament and US-China virtual meeting. The US retail sales report on Tuesday is also closely watched as inflation concerns remain at the forefront.

Euro’s decline has boosted the dollar index, which is heavily euro-weighted, as the European Central Bank (ECB) will not likely shift its current dovish stance.

US-China virtual summit

Amid problematic relations between two of the world’s largest economies, investors will also be closely watching remarks from President Biden and Chinese leader Xi Jinping during their virtual summit on Monday evening.

China’s surprising data

Despite the latest wave of COVID-19 cases in China and supply constraints, China’s industrial output grew surprisingly faster in October, according to data released Monday morning. Meanwhile, Japan’s economy shrank far faster than economists anticipated in the third quarter as supply disruptions slowed exports and business spending plans.

Statistics released earlier in the day showed industrial production increased 3.5% YoY, surprising most investors who were expecting 3% improvement, lower than September’s growth of 3.1%.

While power disruptions and higher raw material prices weighed on industrial output in September, improving power supply boosted the manufacturing sector in October from a year earlier.

With 4.9% growth, retail sales have also surpassed forecasts, which projected growth of 3.5%.

Events of the week

Tuesday will bring US retail sales data for October, with economists expecting an increase of 1.1% after a 0.7% gain in September.

A global supply chain crunch has fueled US inflation to its highest level in over three decades. According to Friday’s data, consumer confidence fell to its lowest in a decade due to higher prices.

To contain inflation, most investors expect the Federal Reserve to raise interest rates sooner than currently forecast.

Tuesday’s economic calendar also includes data on US industrial production, Wednesday’s housing starts and building permits, and Thursday’s initial jobless claims figures.

The UK jobs report will once again be in the spotlight on Tuesday, as the BoE has noted that it needs more information on the labour market strength before raising interest rates for the first time since the pandemic began.