While market analysts are focused on the geopolitical developments in the Middle East, the US retail sales report and inflation data coming from the UK and Canada are expected to provide clues regarding the impact of strict monetary policies on these economies.

Asian stock markets rose on Tuesday morning while investors expect the Chinese GDP growth report for the third quarter of the year to be released tomorrow.

New Zealand’s CPI inflation hit a two-year low in the third quarter of the year, coming in at 5.6% on a year-to-year basis. As a result, the New Zealand dollar weakened by 0.44% with traders thinking that the Reserve Bank of New Zealand (RBNZ) may not raise borrowing costs in November.
 

US Retail Sales In September

US Retail Sales data will be published by the US Census Bureau later today. Economists expect the report to show a 0.2% rise, on a monthly basis, in September with the anticipated figure being lower than August’s. Market analysts suggest that consumer spending has dropped considerably in the last few months as high borrowing costs and increased prices seem to put a strain on consumers' budgets.

Earlier in the month, Adobe Analytics suggested that online sales during the holiday season are expected to rise 4.8% on an annualised basis, as retailers try to lure consumers into spending by offering large discounts on many products.
 

Canada CPI Inflation Report

On Wednesday, the Bank of Canada (BoC) and Statistics Canada will release their September inflation figures. Economists estimate that headline inflation remained flat in September, expecting it to come in at 4% on a year-to-year basis.  

Bank of Canada Governor Tiff Macklem told reporters attending the recent International Monetary Fund (IMF) that the bank would "take into account" the tighter financial conditions due to higher long-term bond yields before its upcoming monetary policy announcement scheduled for October 25th. The BoC’s head reiterated that the Canadian economy isn’t heading towards a recession.
 

China GDP Growth In Q3 2023

Earlier on Wednesday, the National Bureau of Statistics will publish its Q3 GDP report. Some economists suggest that the Chinese economy grew by 4.4% on a yearly basis, dropping from the 6.3% recorded in the second quarter, but expanded by 1.0% on a quarterly basis, slightly higher than the previous quarter.

Exports and imports have continued their declining trajectory while, despite increased bank lending, analysts have observed deflationary pressures. A Reuters report noted that “the economy would grow 5.0% this year, in line with a September survey and Beijing’s own target but lower than 5.5% forecast in a July poll. Growth was forecast to slow to 4.5% in 2024.”
 

UK CPI Inflation Report 

Economists in the UK will be expecting the country’s inflation data to be released on Wednesday morning. Market analysts predict headline inflation to come in at 6.5% on a yearly basis in September.

The Bank of England’s chief economist, Huw Pill, said that the Monetary Policy Committee (MPC) might have to move forward with more monetary policy tightening to achieve the 2% inflation target.

“We still have some work to do, in order to get back to 2%. And we probably have some work to do, to ensure that when we get back to 2% we do so in a way that is sustainable through time,” he said adding that falling headline inflation wouldn’t be sufficient for the BoE to say that the job is done.

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