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The Week Ahead – Geopolitics, Monetary Policy and a Data Deluge in Focus

Bob Mason

On the Macro

For the Dollar:

It’s a hectic week ahead on the economic calendar.

October consumer confidence figures on Tuesday and 3rd quarter GDP and ADP nonfarm employment change numbers on Wednesday get things going.

On Thursday, the FED’s preferred core PCE price index and personal spending numbers will also influence ahead of a busy Friday.

October nonfarm payroll and wage growth figures, the October unemployment rate and ISM Manufacturing PMI numbers round off a busy week on Friday.

Of less influence through the week include goods trade data due out on Monday and real estate sector numbers throughout the week.

On the monetary policy front, the FED will also deliver its October policy decision and rate statement on Wednesday.

The markets are expecting a rate cut, so it will ultimately boil down to whether the FED delivers and whether the statement insinuates more cuts down the track.

The Dollar Spot Index ended the week up by 0.56% at $97.831.

For the EUR:

It’s a relatively busy week ahead on the economic data front.

The markets will need to wait until Wednesday for the first set of stats. French 3rd quarter GDP, September consumer spending numbers and unemployment figures out of Germany are due.

On Thursday, German retail sales, Spanish 3rd quarter GDP numbers and the Eurozone’s unemployment rate and 3rd quarter GDP numbers are due out.

Of less influence on the day will be French, Italian and Eurozone prelim inflation figures.

Outside of the stats, geopolitical risk will continue to influence throughout the week.

The EUR/USD ended the week down by 0.78% to $1.1080.

For the Pound:

It’s another quiet week ahead on the economic calendar.

Economic data is limited to October’s Manufacturing PMI due out on Friday.

We can expect the Pound to continue to respond to the numbers, though any moves will likely be short-lived.

With Brexit in focus, expect chatter from the UK Parliament to have the greatest influence in the week. There is also the Brexit extension to consider. Will Britain get until 31st January 2020?

The GBP/USD ended the week down by 1.21% to $1.2827.

For the Loonie:

It’s a relatively quiet week ahead on the data front.

August GDP numbers and September’s RMPI are due out on Thursday.

While both sets of numbers will influence, the BoC interest rate decision on Wednesday will have the greatest impact.

The Loonie ended the week up by 0.53% to C$1.3058 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively busy week ahead.

3rd quarter inflation figures due out on Wednesday will have a material influence. The RBA continues to raise concerns over inflationary pressure. Soft numbers would question recently hawkish chatter.

Business confidence and private-sector numbers on Thursday and manufacturing data and wholesale inflation figures on Friday will also influence.

Barring dire numbers, we would expect building approval figures to have a muted impact on the Aussie Dollar.

Expect private sector PMIs out of China to influence on Thursday and Friday.

The Aussie Dollar ended the week down by 0.48% to $0.6823.

For the Japanese Yen:

It’s a relatively busy week ahead on the economic calendar.

Tokyo October inflation figures, due out on Tuesday, get things going. With the BoJ monetary policy decision on Thursday, we can expect some Yen sensitivity to the numbers.

September retail sales figures due out on Wednesday and prelim September industrial production figures on Thursday will also impact.

We expect the BoJ policy decision on Thursday to have the greatest impact, however. While more easing is expected, how far will the BoJ go to provide support?

The Japanese Yen ended the week down by 0.20% to ¥108.67 against the U.S Dollar.

For the Kiwi Dollar:

Stats are on the quieter side once more in the week ahead.

Economic data is limited to September building consent figures due out on Thursday that will likely have a muted impact on the Kiwi.

Market sentiment towards monetary policy will remain the key driver in the week. Following Wednesday’s FED policy decision, the Kiwi could come under pressure should the FED deliver a hawkish rate cut.

The Kiwi Dollar ended the week down by 0.52% to $0.6349.

Out of China:

It’s a relatively busy week on the economic data front. October private sector PMI figures are due out of China on Thursday and Friday.

While service sector activity will need to support, the focus will continue to be on the manufacturing PMIs.

The Yuan ended the week up by 0.23% to CNY7.0653 against the Greenback.

Geo-Politics

Impeachment: No news is good news or so the markets think. Closed-door testimony has been ongoing and more is on the cards as the Democrats smell blood. Last week, the U.S former ambassador to Ukraine testified that the U.S President had, in fact, looked for a quid pro quo. This is something that Trump has continued to deny.

The sworn testimony raises the stakes, so we can expect greater focus in the week ahead. Any hint of a wave of Republican defection and expect the markets to balk…

Trade Wars: while the news was positive last week, further nursing is going to be needed in the week ahead. Both, Washington and Beijing will need to continue to deliver positive messages to support risk appetite.

UK Politics: While the UK Parliament waits on for the EU’s approval of the latest extension, the British PM is pushing for an election.

Timing is everything. If the EU cuts the extension period down, time is of the essence and there may not be enough time for a general election or a 2nd referendum. That would leave Britain with the Johnson deal and an orderly departure from the UK.

If the extension is through to 31st January then the battle will begin. Will the Opposition Party manage to get a 2nd referendum or will Boris Johnson get a general election?

The Rest

Earnings:  It’s another big week on the earnings front. Alphabet Inc. (Mon), General Motors (Tues), Apple Inc. (Wed), Facebook Inc. (Wed), Chevron Corp. (Fri), and Exxon Mobil Corp (Fri) are amongst major companies to release earnings in the week ahead.

Bank of Canada Policy: The BoC is expected to leave rates unchanged on Wednesday. The bigger question, however, is whether there has been sufficiently weak data to set up a more dovish tone…

Bank of Japan: There’s been plenty of talk, so it is time to see if there is any action. With the Japanese economy struggling, the BoJ needs to deliver something…

FED Monetary Policy: A 25 basis point rate cut is priced in. Expect the rate statement to have the greatest impact. Whatever the FED does, the U.S President is unlikely to be too complimentary. Zero rates are some way off…

This article was originally posted on FX Empire

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