The Week Ahead – Brexit, Central Banks, NFP Data and Trade in Focus

On the Macro

For the Dollar:

It’s a busy week ahead for the Dollar. February ISM non-manufacturing PMI and December new home sales figures kick off the week. The numbers are due out on Tuesday ahead of February’s ADP nonfarm employment change figures on Wednesday. 4^th Quarter non-farm productivity and unit labor cost figures will be released on Thursday alongside the weekly jobless claims figures. On Friday, the focus shifts to February’s labor market figures. Key drivers will include wage growth and non-farm payrolls. A forecasted drop in the unemployment rate could give the Dollar a boost on the day.

Outside the numbers, the Oval Office and Capitol Hill will need to be eyed.

The Dollar Spot Index ended the week up by 0.02% to $96.527.

For the EUR:

January retail sales figures out Eurozone are due out on Tuesday. Finalized service sector PMI numbers for France, Germany and the Eurozone are also due out alongside Italy and Spain’s figures. Barring material deviation from prelim, we would expect the retail sales figures to be a key driver on the day.

Looking ahead, finalized 4^th quarter GDP numbers are due out on Thursday. We would expect the numbers to have a limited impact, barring a deviation from 2^nd estimates. January factory orders out of Germany on Friday will likely have the greatest impact in the week.

Outside of the numbers, the ECB’s monetary policy decision and all-important press conference on Thursday could peg back the EUR.

The EUR/USD ended the week up 0.26% to $1.1365.

For the Pound:

Key stats include February’s construction and Service PMI numbers due out on Monday and Tuesday. Of lesser influence will be the BRC Retail Sales Monitor, due out on Tuesday morning. The numbers will have an impact, in spite of continued Brexit chatter. We can expect a shift in focus towards the UK economy should sentiment continue to favor an extended delay to Brexit.

It goes without saying that Brexit will remain the key driver throughout the week.

The GBP/USD ended the week up 1.14% to $1.3202.

For the Loonie:

The first set of stats are due out on Wednesday. 4^th quarter productivity and December trade figures are released ahead of February’s Ivey PMI later in the day.

At the end of the week, February’s employment change and the unemployment rate will also have a material influence. Of less significance will be January building permit and February housing start numbers due out on Thursday and Friday.

Outside the numbers, the Bank of Canada’s interest rate decision and accompanying statements will be the key driver mid-week. Ahead of the week’s numbers, oil prices and risk sentiment will continue to provide direction.

The Loonie ended the week down by 1.23% to C$1.3297 against the U.S Dollar.

Out of Asia

It’s a busier week ahead.

For the Aussie Dollar:

January building approvals and 4^th quarter company gross operating profits kick off the week on Monday. With 4^th quarter GDP numbers due out on Wednesday and January retail sales and trade figures on Thursday, it’s going to be a choppy week for the Aussie.

Outside the numbers, the RBA’s monetary policy decision and more important rate statement release on Tuesday will be key. Risk sentiment and progress on trade talks will also influence.

The Aussie Dollar ended the week down 0.70% at $0.7079.

For the Japanese Yen:

The markets will need to wait until Friday for the stats. 4^th quarter GDP and January household spending figures will provide direction at the end of the week.

Market risk sentiment will continue to be the key driver throughout the week.

The Japanese Yen ended the week down 1.08% at ¥111.89 against the U.S Dollar.

For the Kiwi Dollar:

There are no material stats due out to cause a shift in sentiment towards the RBNZ’s hawkish economic outlook. Market risk sentiment through the week could pin back any upside, with trade talks, and more, likely to be driving risk appetite.

The Kiwi Dollar ended the week down 0.67% to $0.6800.

Out of China:

February service sector PMI numbers due out on Tuesday, which will have a limited impact on market risk sentiment. Of greater significance will be February’s trade data, which is due out on Friday. Outside of the numbers, the National People’s Congress stats on Tuesday. The focus will be on measures to counter slower growth and whether the government will address the tech issue.

Geo-Politics

U.S – China Trade War:  Expect more updates on trade talks. The markets will be looking to see China’s response to Trump’s call for tariffs on agriculture to be removed.

Brexit: Britain inches forward and there’s yet to be a deal on the table. Expect plenty of chatter in the week.

Homeland:  Trump may get caught in Michael Cohen crossfires…

The Rest

On the monetary policy front,

For the AUD, Tuesday’s interest rate decision and rate statement will provide further indications on whether a rate cut is on the horizon. The RBA will leave rates unchanged this week.

For the Loonie, The Bank of Canada is unlikely to deliver a surprise on Wednesday. The accompanying statements could be a different story altogether, however.

For the EUR, the ECB is not expected to make any policy adjustments. There’s been plenty of chatter on the introduction of new Targeted Long Term Financing Operations (“TLTRO”), however.  The ECB will also release its economic projections.