United States: Greenback Breather: Last week was relatively quiet in terms of economic news and indicators around the world. The foreign exchange markets were mainly focused on inflation figures from the United States, Eurozone and United Kingdom, and on the Bank of Japan’s meeting. No major moves were recorded for the major currencies, but the US Dollar had a moderate halt to its weakening trend and recouped some of its losses. The Sterling Pound opened the week at 1.6715 and started on a strong tone, reaching a high of 1.6878 on Monday. However, the Pound weakened thereafter to reach a low of 1.6461 on Friday, closing the week at 1.6503.
The Euro’s performance was more erratic, with no noticeable trend during the week’; it traded between a high of 1.5016 and a low of 1.4802, before ending the week at 1.4862. The Swiss Franc’s performance was similar to the Pound’s. The currency reached a high of 1.0048, once again failing to reach parity with the US Dollar, and then weakened to a low of 1.0223, closing the week at 1.0179. On the other hand, the Japanese Yen was stronger last week; it started at 89.66, but strengthened afterwards to a high of 88.64, and ended the week at 88.88.
Deflation Slowly Fading: After a short period of deflation in consumer prices, price trends are now reversing back to normal ranges. The cost of living in the United States rose more than forecast in October as Americans paid more for fuel, with prices up nearly 12 percent in the last three months, and food prices, which are stabilising after earlier declines. The monthly 0.3 percent rise in the Consumer Price Index (CPI) followed a 0.2 percent increase in September, as shown by figures from the Labor Department. Excluding food and energy costs, the core index rose 0.2 percent for a second month. The year-on-year inflation trend is now at just -0.2 percent since bottoming at -2.1 percent in July. The yearly figure seems to be cutting its way back into positive territory.
Housing Starts Drop Sharply: Residential construction in the United States unexpectedly dropped in October by almost 11 percent to a seasonally adjusted annual rate of 529,000 units. This figure represents the lowest level since April, and the percentage drop was the biggest since January.
US Retail Sales Rebound: Retail Sales rebounded more than forecast in October, as demand for autos climbed, and the manufacturing industry is in expansion for a fourth month. Headline sales were up 1.4 percent month-on-month in October, with solid gains in major categories. Auto sales have resumed their upward climb after the expiration of tax incentive programs in September, and are set to continue in November. More importantly, consumer momentum is also improving outside of the auto industry: retail sales excluding autos and petrol posted a monthly gain of 0.3 percent, which is the third consecutive monthly gain.
Jobless Claims Unchanged: The number of Americans filing claims for unemployment benefits held at a 10-month low last week. Initial jobless claims were unchanged at 505,000 in the week ended November 14. Moreover, the number of people claiming benefits after drawing an initial week of aid fell by almost 40,000 to 5.611 million. This number is an 8-month low for the so-called continuous jobless claims.
Europe: Deflation Still a Trend: European consumer prices declined for a fifth consecutive month in October, as rising unemployment discouraged household spending. Prices in the 16-nation Euro region declined 0.1 percent from a year earlier, after falling 0.3 percent in September. This was mainly due to European companies being forced to cut prices and eliminate jobs to survive the recession. Even though the region’s economy returned to growth in the third quarter, rising unemployment is still destabilising consumer spending. In the month, consumer prices rose by 0.2 percent.
United Kingdom: Inflation Rises: The United Kingdom’s inflation rate rose more than economists’ forecast in October, climbing for the first time in eight months. Consumer prices gained 1.5 percent from a year earlier, compared with 1.1 percent recorded in the previous month. The main factors driving this rise were transport, recreation and culture, and food. The rate is still below the Bank of England’s target rate of 2.0 percent, but it shows improvement and the possibility of raising interest rates earlier than what was previously anticipated. Excluding the volatile components, the so-called core CPI rose by 1.8 percent on a yearly basis.
Global: Gold Breaking New Records: Gold hit a fresh record slightly below $1,150 an ounce on Wednesday, boosting precious metals across the board, as prices broke through technical resistance levels. Gold prices are being driven mostly by inflation fears, a weaker US Dollar, and the possibility that many countries switch their US Dollar holdings to Gold in the near future.
