The Week Ahead – a Trump – Xi Truce, Brexit and Monetary Policy in Focus

It’s a big week ahead, with plenty of stats out of key economies, policy decisions, Brexit debate and market response to a trade war truce to consider.
Bob Mason
the week ahead

On the Macro 

For the Dollar, It’s a busy week ahead on the data front, with key stats including November private sector PMI numbers due out on Monday and Wednesday. Other key stats include November’s ADP nonfarm employment change figures on Wednesday, trade and factory order numbers on Thursday and the all-important wage growth and nonfarm payroll figures on Friday that are released ahead of prelim December consumer sentiment figures. Outside of the stats, FED Chair Powell’s testimony on Wednesday and market response to a trade war truce between the U.S and China will also influence. The Dollar Spot Index ended the week up 0.37% to $97.272.

For the EUR, Key stats include November private sector PMI numbers due out on Monday and Wednesday, focus being on Germany’s manufacturing and the Eurozone’s finalized numbers. October factory orders and industrial production numbers out of Germany on Thursday and Friday will also need to be watched closely, while the Eurozone’s 3rd estimate GDP numbers for the 3rd quarter will likely be brushed aside ahead of the U.S NFP numbers.  The EUR/USD ended the week down 0.18% to $1.1317.

For the Pound, stats include November manufacturing, construction and service sector PMI numbers due out Monday through Thursday, with November’s BRC Retail Sales Monitor numbers due out on Tuesday. While we will expect the private sector PMIs to have a material impact, Brexit will remain the key driver as the 11th December parliamentary vote draws nearer. BoE MCP member Haldane and BoE Governor Carney could provide some direction in the early part of the week, focus likely to be on Carney and any views on the Brexit deal. The GBP/USD ended the week down 0.51% to $1.2749.

For the Loonie, it’s a big week ahead, with stats including 3rd quarter labour productivity numbers on Tuesday, October trade and November PMI numbers on Thursday and November labour market figures on Friday. Outside of the stats, the BoC interest rate decision and rate statement will be in focus on Wednesday and will set the tone for the rest of the week. The Loonie ended the week down 0.41% to C$1.3292 against the U.S Dollar.

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

For the Aussie Dollar, stats include 3rd quarter gross operating profit, October building approvals and November manufacturing numbers on Monday, 3rd quarter GDP numbers on Wednesday and October retail sales and trade data on Friday. Outside of the numbers the RBA interest rate decision and rate statement on Tuesday will also be in focus, the RBA yet to demonstrate any near-term plan to shift on policy. The Aussie Dollar ended the week up 1.01% to $0.7306.

For the Japanese yen, economic data is on the lighter side, with stats limited to 3rd quarter capital spending numbers on Monday and October household spending figures due out on Friday. While we can expect the consumption numbers to have an influence, updates from the G20 Summit and economic data out of China will also influence risk sentiment through the week. The Japanese Yen ended the week down 0.54% to ¥113.57 against the U.S Dollar.

For the Kiwi Dollar, there are no material stats scheduled for release, leaving the Kiwi Dollar in the hands of market risk appetite through the week. The Kiwi Dollar ended the week up 1.34% to $0.6872.

Out of China, We can expect reaction to the Trump – Xi truce at the G20 to offset any negative private sector PMI numbers out on Monday and Wednesday, which are due out ahead of November trade figures that are scheduled for release on Saturday.

Geo-Politics

Brexit: It’s a big week ahead for the Pound, with 5-days of debates on the deal kicking off on Tuesday, ahead of 11th December vote, likely to garner plenty of attention through the week.

U.S – China Trade War:  There will be some market relief following Saturday’s Trump – Xi truce, with the U.S and China now needing to make some progress to bring an end to the tariffs imposed over the course of the year to restore some market optimism.

The Rest

On the monetary policy front,

For the Aussie Dollar, the RBA interest rate decision and rate statement will be in focus on Tuesday. While rates are expected to be left unchanged, the devil will be in the detail, the RBA unlikely to be signalling a shift in policy this time around.

For the Loonie, the BoC has been particularly hawkish, while the economic indicators have yet to support another rate hike before the end of the year, which does leave the Loonie ripe for a bounce should the BoC stand firm on its forward guidance and talk up a turn of the year move.

For the U.S Dollar, FED Chair Powell’s testimony on Wednesday will be of material influence, particularly when considering a recent shift in opinion on where policy neutral sits that has led to a more dovish outlook on rates for next year.  U.S President Trump’s animosity towards the FED Chair could also be discussed, which will likely draw out a Tweet or two from the U.S President. Other FOMC members scheduled to speak through the week include Kaplan, Bostic and Brainard.

Crude oil: OPEC’s meeting on Thursday will have the futures market on tender hooks, a ramp up in U.S shale production and larger than anticipated output by Iran expected to force the Saudi and Russia’s hand to cut back in order to avoid another week of losses.

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