The Week Ahead – Corporate Earnings, Stats, and Geopolitics to Deliver More VolatilityThe focus will be on Iran and the signing of the U.S – China phase 1 trade agreement. Any shocks and expect risk aversion to bite.
On the Macro
It’s a busy week ahead on the economic calendar, with 63 stats to monitor. In the previous week, 55 stats had been in focus.
Expectations are for economic conditions to be on the up, so disappointing numbers could weigh heavily in the weekend.
The only parachute is that the U.S and China are due to sign the phase 1 trade agreement on 15th.
For the Dollar:
After a quiet start to the week, December inflation figures due out on Tuesday will provide direction.
Barring any better than expected numbers, the numbers will likely have a muted impact on the Dollar, however.
On Wednesday, wholesale inflation and the NY Empire State Manufacturing Index will provide direction ahead of a busy Thursday.
On Thursday, key stats include December retail sales and January’s Philly FED Manufacturing numbers.
Barring dire figures, we would expect business inventories and the weekly jobless claims to have a muted impact on the Dollar.
On Friday, the focus will then shift to December industrial production numbers and prelim consumer sentiment figures for January.
November’s JOLT’s job openings and housing sector data will likely have a muted impact on the day.
On the geopolitical front, the signing of the U.S – China phase 1 agreement, Brexit and the Middle East will also need consideration.
The Dollar Spot Index ended the week up by 0.45% to $97.356.
For the EUR:
It’s also a relatively quiet week ahead on the economic data front.
Key stats include November industrial production and trade figure for the Eurozone, due out on Wednesday.
We would expect finalized December inflation figures for member states and the Eurozone to have a muted impact in the week.
On the monetary policy front, the ECB monetary policy meeting minutes are due out on Thursday. It was Lagarde’s first meet, so we can expect some influence.
Outside of the numbers, geopolitical risk will continue to influence as the markets look towards Brexit chatter, trade, and the Middle East.
The EUR/USD ended the week down by 0.50% to $1.1121.
For the Pound:
It’s another relatively busy week ahead on the economic calendar. Key stats include industrial production and manufacturing production figures for December, which are due out on Monday along with trade and GDP numbers.
We would expect the GDP, manufacturing and industrial production figures to have the greatest influence.
On Wednesday, December inflation figures are also due out and will influence. Forecasts are Pound negative.
4th quarter business investment figures will likely have a muted impact on the Pound on Monday
Outside of the numbers, Brexit will continue to be the main area of focus. Just 2-weeks remain until Britain leaves the EU and enters the transition period.
It’s all about Britain’s terms of departure from the EU near-term.
The GBP/USD ended the week down by 0.11% to $1.3064.
For the Loonie:
It’s a particularly quiet week ahead on the economic calendar.
Key stats are limited to November foreign securities purchase due out on Friday, which will likely have a muted impact on the Loonie.
From the Bank of Canada, the Business Outlook Survey due out on Monday will influence. Expectations are for the BoC to stand pat on policy near-term. The Survey could deliver a different message.
Direction through the week will come from market risk appetite and influence on crude oil prices.
While the USMCA and the Phase 1 trade agreement are positives. Any re-escalation in the Middle East would also be Loonie positive.
The Loonie ended the week up by 0.22% to C$1.3050 against the U.S Dollar.
Out of Asia
For the Aussie Dollar:
It’s also a quiet week ahead.
Key stats are limited to new home sales figures due out on Friday.
The lack of stats throughout the week will leave the Aussie Dollar in the hands of news from Washington and the Middle East.
It was supposed to be a positive week for the Aussie, with the U.S and China scheduled to sign the phase 1 agreement.
From elsewhere, expect industrial production and 4th quarter GDP figures due out of China on Friday to also influence.
The Aussie Dollar ended the week down by 1.13% to $0.6901.
For the Kiwi Dollar:
There it’s a busier week ahead. Key stats include December electronic card sales and Business PMI figures due out on Thursday and Friday.
November building consent numbers will likely have a muted impact on the Kiwi on Tuesday.
From elsewhere, 4th quarter GDP numbers out of China will also provide direction at the end of the week.
On the geopolitical front, expect any escalation in the Middle East to pressure the Kiwi Dollar.
The Kiwi Dollar ended the week down by 1.02% to $0.6631.
For the Japanese Yen:
It’s a particularly quiet week on the economic calendar. There are no material stats due out of Japan to provide direction for the Japanese Yen.
A lack of stats will leave the Japanese Yen in the hands of market risk appetite throughout the week.
Expect chatter from Washington on trade and the Middle East to influence as tensions remain elevated between Iran and the U.S.
The Japanese Yen ended the week down by 0.01% to ¥109.45 against the U.S Dollar.
Out of China
It’s a relatively busy week on the economic data front. Trade data is due out on Tuesday, which will influence ahead of Wednesday’s signing of the trade agreement. The focus will then shift to 4th quarter GDP and December industrial production figures due out on Friday.
December fixed asset investment figures would likely have a muted impact on Friday.
On the geopolitical front, officials from China are due to sign the phase 1 trade agreement in Washington on Wednesday.
China remained silent as the situation escalated in the Middle East last week. The last thing that the markets need is for China and Russia to take sides…
Trump and the administration may take the opportunity to call on China’s support to rein in Iran in talks early in the week…
The Yuan ended the week up by 1.09% to CNY6.9192 against the Greenback.
Impeachment: There was little progress made last week, the start of Trump’s impeachment trial could be delayed until mid to late January. The timing of the U.S drone attacks in the Middle East was interesting… We’ve yet to hear of any Republicans looking to jump from the Unity Ship… This could change, however, with the talk of additional impeachment articles hitting the news wires.
Trade Wars: It’s been a long time coming. The U.S and China are scheduled to sign the phase 1 agreement on Wednesday. While the signing is risk positive, the markets will want to know what’s next. Impeachment, rising tensions in the Middle East and the 2020 Presidential Election campaign may hit pause on further progress on this side of Election Day. That may not be too appealing for the global financial markets.
There is also the risk of the U.S President backing away from signing…
UK Politics: The UK Parliament voted on the Withdrawal Bill last week. In the week ahead, the focus will likely shift to the EU. Member states have until 1st February to submit their requirements to begin negotiations. With 11-months remaining until the end of the Transition Period, expect sensitivity towards the prospects of a trade agreement to continue.
Iran and the Middle East: It was a big week for the markets last week. Iran’s missile attacks in retaliation to the killing of Soleimani raised a number of red flags. While the retaliation eased pressure on Iran’s supreme leader to do more, it was far from a significant response. It remains to be seen whether there is more to come. The uncertainty over what’s next will leave the markets sensitive to any chatter from Tehran and Washington. Fresh sanctions will give Tehran more food for thought…
It’s a relatively busy week ahead on the corporate earnings calendar, with Bank of America, Citigroup, Goldman Sachs, JPMorgan, and Wells Fargo are due to release results in the week.