Finally, economists predict retail sales will increase by 0.7% year-on-year in October, up from 0.5% in September. Retail sales could spur demand-driven inflation, potentially raising bets on a December BoJ rate hike. Conversely, weaker sales may dampen bets on a December hike, impacting the appetite for the Japanese Yen.
For the USD/JPY pair, rising bets on a December BoJ rate hike may signal a drop below 153.5. However, falling expectations for a December hike could drive the USD/JPY toward 156.
In the November 13-21 Reuters poll, 56% of economists predicted the BoJ would raise interest rates in December, up from 49% in the October poll. Economists were more hawkish on the weaker Japanese Yen, reducing downside risks to the global economy, and Japan's economic data and prices aligning with the BoJ's forecasts.
On Tuesday, November 26, economists forecast the CB Consumer Confidence Index to jump from 108.7 in October to 112.0 in November. Upward trends in consumer confidence may signal a pickup in consumer spending, potentially fueling inflationary pressures.
Investors could reduce bets on a December Fed rate cut, driving US dollar demand. Conversely, an unexpected fall in confidence may raise expectations of a rate cut, lowering US dollar demand.
On Wednesday, November 27, the all-important US Personal Income and Outlays Report could influence the Fed rate path. Economists forecast the Core PCE Price Index to increase by 2.7% year-on-year in October, mirroring September's trends.
A higher Core PCE Price Index would lower expectations of a Fed rate cut, increasing US dollar demand. However, an unexpected fall in inflation could refuel bets on a Fed rate cut.
While the Core PCE Price Index will be crucial for the Fed, personal income and spending trends also need consideration. Rising personal income and spending could fuel demand-driven inflation, signaling a higher inflation outlook.