The Week Ahead – Brexit, COVID-19, Monetary Policy, Economic Data, and Capitol Hill in Focus

On the Macro

It’s a particularly busy week ahead on the economic calendar, with 95 stats in focus in the week ending 18^th December. In the week prior, 52 stats had been in focus.

For the Dollar:

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

In the 1^st half of the week, November retail sales and December private sector PMIs are due out, along with industrial production and NY Empire State Manufacturing figures.

Expect retail sales and service sector PMIs to be the key drivers on Tuesday and Wednesday.

The focus will then shift to Philly FED Manufacturing PMI and weekly jobless claims figures on Thursday.

Expect the initial jobless claims figures to garner the greatest interest in the day.

On the monetary policy front, the FED is also in action on Wednesday.

While the FED is expected to leave interest rates unchanged, an expansion to the bond purchasing program could be on the cards.

Also of interest, however, will be the FED’s interest rate projections and economic projections.

The Dollar Spot Index ended the week up by 0.30% to 90.976.

For the EUR:

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

In the 1^st half of the week, October industrial production figures for the Eurozone and finalized inflation figures from Italy and France are due out.

Expect industrial production figures to have the greatest influence.

Mid-week, the focus will shift to prelim December private sector PMI numbers for France, Germany, and the Eurozone.

Expect plenty of influence from the PMI numbers, with any deterioration likely to weigh on risk sentiment.

In the 2^nd half of the week, German IFO Business Climate index figures for December will also influence on Friday.

Away from the economic calendar, chatter from Capitol Hill, Brexit, and COVID-19 vaccination news will also provide direction.

The EUR ended the week up by 0.07% to $1.2112.

For the Pound:

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

In the 1^st half of the week, claimant count, wage growth, employment change, and unemployment figures are in focus.

Expect claimant counts and the unemployment rate to be the key drivers.

Mid-week, November inflation figures will also garner interest ahead of a busy 2^nd half of the week.

November retail sales figures are due out, which will draw plenty of interest.

The main event of the week, however, is the BoE monetary policy decision on Thursday.

There has been the talk of negative rates, the markets will get an idea of what to expect, particularly with some degree of clarity on Brexit by Thursday…

While the markets are expecting the BoE to leave rates unchanged, forward guidance will, therefore, be key.

The Pound ended the week down by 1.61% to $1.3224.

For the Loonie:

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

On Wednesday, November inflation figures are due out ahead of October retail sales figures on Friday.

Other stats in the week include housing start and manufacturing and wholesale sales figures. We would expect these numbers to have a muted impact on the Loonie, however.

Away from the economic calendar, expect FED monetary policy, U.S stimulus talks, and COVID-19 news to also influence.

The Loonie ended the week up by 0.12% to C$1.2769 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

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

November employment change figures, due out at the end of the week, will draw plenty of interest.

New home sales figures due out on Wednesday will have a muted impact on the Aussie Dollar, however.

From elsewhere, expect chatter from Capitol Hill and COVID-19 vaccine news to also provide direction.

The Aussie Dollar ended the week up by 1.45% to $0.7533.

For the Kiwi Dollar:

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

3^rd quarter GDP figures on Thursday and November trade data on Friday will be the key drivers.

Away from the economic calendar, however, expect any rise in U.S – China tensions to overshadow any positive numbers.

The Kiwi Dollar ended the week up by 0.51% to $0.7084.

For the Japanese Yen:

It is a busy week on the economic calendar.

4^th quarter Tankan survey numbers are due out at the start of the week, along with finalized industrial production figures for October.

While the numbers will draw interest, the impact on the Yen will likely be relatively muted.

On Wednesday, November trade data will influence, with the markets looking for improved trade terms ahead of the BoJ monetary policy decision on Friday.

At the end of the week, November inflation figures will likely have a muted impact on the Yen, however.

On Friday, the BoJ will likely stand pat once more, with a COVID-19 vaccine easing pressure to deliver more support.

That should leave the Yen in the hands of COVID-19 news and stimulus talk on Capitol Hill.

The Japanese Yen ended the week up by 0.12% to ¥104.04 against the U.S Dollar.

Out of China

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

At the start of the week, new loans will draw interest ahead of a busy Tuesday.

On Tuesday, November fixed asset investment, industrial production, retail sales, and unemployment figures are due out.

Expect industrial production, retail sales, and unemployment figures to have the greatest influence.

Away from the economic calendar, chatter from Beijing and Capitol Hill will also provide riskier assets with direction.

The Chinese Yuan ended the week down by 0.23% to CNY6.5463 against the U.S Dollar.

Geo-Politics

U.S Politics

Late into the day on Friday, lawmakers extended federal funding for another week. While averting a government shutdown, there was a failure to deliver a stimulus package.

With the U.S continuing to reel from the rising number of COVID-19 cases, labor market conditions have deteriorated.

Progress in the week is going to be needed as will a resolution to government funding before Christmas.

On the COVID-19 vaccine front, the FDA is also due to review the Moderna Inc. vaccine in the week ahead. Expect more pressure from the Whitehouse to deliver a much-needed 2^nd vaccine.

Brexit

Sunday’s Brexit deadline will decide the near-term fate of Britain and its trade terms with the EU.

With key differences remaining and limited time to resolve the remaining issues, expectations are for talks to continue in the New Year should both sides fail to reach an agreement ahead of the Sunday deadline.

While the hope of an eventual deal could limit the damage there will likely be some fallout from a no-deal Brexit.