The Week Ahead – A Brexit Showdown, the BoE, the FED and the CEWC in Focus

On the Macro

For the Dollar, it’s a big week ahead, with key stats including manufacturing PMI numbers on Monday and Thursday and November housing sector on Tuesday and Wednesday. A particularly busy day on Friday sees November durable goods, finalised 3^rd quarter GDP numbers, the FED’s preferred November Core PCE Price Index figures, November personal spending and prelim December consumer sentiment numbers scheduled for release. While the stats will have an influence, it will ultimately boil down to the FED and its economic projections and rate path for 2019 and whether the Friday stats will influence the Dollar. The Dollar Spot Index ended the week up 0.96% to $97.433.

For the EUR, it’s a relatively quiet week on the data front, with stats limited to November finalized inflation numbers and October trade data out of the Eurozone on Monday, Germany business sentiment numbers on Tuesday, wholesale inflation numbers out of Germany on Wednesday and French consumer spending and German consumer sentiment numbers on Friday. On the data front we will expect focus to be on the Eurozone’s year-on-year inflation numbers on Monday and Germany consumer sentiment numbers on Friday. Outside the numbers, sentiment towards the Eurozone and global economic outlook and policy outlook will continue to influence. The EUR/USD ended the week down 0.64% to $1.1306.

For the Pound, November inflation and CBI Trend Order numbers on Wednesday, retail sales figures on Thursday and 3^rd quarter finalized GDP numbers on Friday will be in focus, though we will expect direction for the Pound to be hinged on the BoE interest rate decision on Thursday, Quarterly Bulletin on Friday and more importantly Brexit and political chatter from both the EU and Parliament. The GBP/USD ended the week down 1.12% to $1.2584.

For the Loonie, a relatively busy week will give the market some idea on where the BoC is heading into the New Year. Key stats include October manufacturing sales figures on Tuesday, November inflation numbers on Wednesday and October retail sales and GDP numbers on Friday. Outside the stats, we can expect the BoC Outlook Survey on Friday and crude oil prices to influence along with any further fall out following HuaWei CFO Wanzhou’s arrest and release on bail. The Loonie ended the week down 0.47% to C$1.3384 against the U.S Dollar.

Out of Asia, it’s another busy week ahead.

For the Aussie Dollar, economic data is limited to November employment numbers due out on Friday. Outside of the data, the release of the Mid-Year Economic and Fiscal Outlook (MYEFO) could give the Aussie Dollar some support on Monday, with the RBA Meeting Minutes also in focus on Tuesday. Through the week, trade war chatter and sentiment towards the global economic outlook will continue to be a factor, with progress on trade talks between the U.S and China key for the Aussie Dollar near-term. The Aussie Dollar ended the week down 10.5% to $0.7172.

For the Japanese yen, stats are limited to November trade data due out on Wednesday and November national inflation numbers due out on Friday, the pair likely to provide some direction for the Yen, though the only upside for the Yen near-term will more likely come from risk aversion than any jump in inflation. Outside of the numbers, there will be some attention on the BoJ policy decision on Thursday, some weak numbers leaving the BoJ in a policy bind. The Japanese Yen ended the week down 0.62% to ¥113.39 against the U.S Dollar.

For the Kiwi Dollar, key stats through the week include business confidence and consumer sentiment numbers due out on Tuesday and Wednesday, with 3^rd quarter GDP numbers and November trade data to provide direction for the Kiwi Dollar on Thursday, though it will ultimately boil down to risk sentiment. The Kiwi Dollar ended the week down 1.00% to $0.6797.

Out of China, with no material stats scheduled for release through the week, focus will be on China’s Annual Central Economic Work Conference (“CEWC”) on Tuesday through Thursday, trade talks between the U.S and China and whether there is any further fallout from HuaWei CFO Wanzhou’s arrest in Canada.

Geo-Politics

Brexit: Following last week’s delay to the Brexit deal vote, a vote on the deal has been slated for mid-January, though it could happen sooner with tensions between May and the EU raising the possibility of a vote next week. Another choppy week ahead…

U.S – China Trade War:  Progress on trade talks with the U.S will be in focus, as will China’s plans to combat tariffs and a slowing economy, with updates from the CEWC of significance.

The Rest

On the monetary policy front,

For the USD, with a rate hike priced in, it’s down to the 2019 economic projections, any downward revisions to growth and a more gradual rate path likely to rock the Dollar and the equity markets.

For the GBP, the BoE will be responding to progress on Brexit negotiations and the economic outlook, the BoE Governor likely to take a cautious tone, reassuring the markets that the BoE has the necessary tools to guide Britain out of the EU.

For the JPY, the BoJ policy decision on Thursday is likely to be the most benign of the three, disappointing economic data pinning back any shift in policy near-term. Key will be the BoJ Governor Kuroda press conference that follows the release of the policy decision.