The Week Ahead – Geo-politics, the RBA and Stats to Drive the Markets

On the Macro

For the Dollar, yet another busy week on the economic calendar, with key stats through the week including September’s ISM private sector PMI numbers due out on Monday and Wednesday, the September ADP nonfarm employment change figures on Wednesday, August factory orders on Thursday and the all-important September labour market figures on Friday, released alongside the NFP and wage growth numbers are August trade figures that could rile the U.S President even more. We will expect Friday’s numbers to be the key driver on the data front, with the ISM private sector PMIs to provide direction through the first half of the week. The Dollar Spot Index ended the week up 0.98% to $95.132.

For the EUR, it’s also a busy week, with finalized September Eurozone and member state private sector PMI numbers due out on Monday and Wednesday. Out of German August retail sales figures on Monday and factory orders on Friday will also be of influence, while we would expect Spanish unemployment numbers on Tuesday and Eurozone retail sales figures on Wednesday to have a relatively muted impact. The EUR/USD ended the week down 1.23% to $1.1604.

For the Pound, September’s manufacturing PMI on Monday, construction PMI on Tuesday and Services PMI on Wednesday will be the key drivers on the data front, September house price figures due out on Tuesday and Friday unlikely to influence, while Brexit chatter and the Tories may well overshadow the stats through the week. The GBP/USD ended the week down 0.31% to $1.3031.

For the Loonie, it’s a quite week on the data front, with key stats limited to September’s Ivey PMI on Thursday and employment numbers on Friday. While we can expect some direction on the stats late in the week, NAFTA could grab the headlines as yet another deadline passes. The Loonie ended the week up 0.06 to C$1.2908 against the U.S Dollar.

Out of Asia, it’s a busier week ahead.

For the Aussie Dollar, stats include September manufacturing numbers on Monday, August building approvals on Wednesday, trade figures on Thursday and retail sales numbers on Friday, focus being on the trade and retail sales figures. Outside the stats, China private sector PMI numbers released this morning and the RBA’s rate statement will also be in focus, any slide in market risk appetite to weigh on the Aussie. The AUD/USD ended the week down 0.91% to $0.7224.

For the Japanese yen, 3^rd quarter Tankan survey numbers are out on Monday that could reflect the upward momentum in the Japanese economy, amidst rising concerns over trade terms, with August household spending on Friday also of significance, any talk of moving more auto production to the U.S increasing the need for domestic consumption to pick up. Outside the stats, expect market risk appetite to also influence, with geo-politics likely to garner plenty of headlines through the week. The Japanese Yen ended the week down 0.99% to ¥113.7 against the U.S Dollar.

For the Kiwi Dollar, it’s a quieter week ahead, with stats limited to 3^rd quarter NIEZR business confidence numbers. The RBNZ removed language relating to weak business confidence from its latest statement, so 3^rd quarter numbers are going to need to stack up to support the Kiwi. Outside of the Kiwi number, expect some response to the weekend’s private sector PMI numbers out of China and trade war chatter through the week. The Kiwi Dollar ended the week down 1.02% to $0.6619.

Out of China, stats are limited to this weekend’s private sector PMI numbers that disappointed and may well influence the global financial markets on Monday, alongside any muscle flexing over trade, the Chinese markets closed for Golden week.

Geo-Politics

Brexit: Brexit woes will be front and centre for the Pound as the British PM May heads for the Tory Party conference that starts on Sunday, with the PM scheduled to deliver a closing speech on Wednesday. Expect plenty of noise and Pound volatility, particularly with Tory Party Brexiteers holding a separate conference on Monday and Tuesday.

Loonie Woes: Another deadline passed and Canada still in NAFTA talks in spite of Trump’s snub of Canadian Prime Minister Trudeau. Will Canada fall in line or could it really end up with tariffs?

U.S – China Trade War:  Golden week in China may not be too golden for the global financial markets should September’s private sector PMI numbers raise more concerns over the economic outlook for the world’s second largest economy. One thing is for sure, China remains unwilling to yield to the demands of the U.S administration.

Iran: Simmering away in the background, with $80 a barrel hit as forecasted. Will the EU get caught in the cross fires of rising tension between the U.S and Iran as the November sanction date looms large?

Italy: With the EUR and the European equity markets hit by the Italian coalition government’s budget on Friday, expect plenty in the week ahead. Greece was bad enough, the Eurozone’s 3^rd largest economy will have a far greater impact. On the bright side, EU feathers are yet to be ruffled with the budget deficit targeted at 2.4% of GDP, within the EU’s 3% limit. It’s the reality that the government has little interest in addressing the second highest debt to GDP ratio in the Eurozone that is the issue.

The Rest

On the monetary policy front, it’s a quieter week ahead…

• For the U.S. Dollar, FOMC members through the week could provide their views on policy following Friday’s numbers, though with the ink still wet on the latest FOMC projections, the Dollar’s unlikely to be too sensitive to the chatter.
• For the Aussie Dollar, Tuesday’s policy decision is a foregone conclusion, while how the RBA views the economic outlook amidst the ongoing trade war with China is not. Some caution over the global economic outlook and possible impact on the Australian economy will likely be key in the accompanying rate statement.