The Week Ahead – Monetary Policy, Stats and Geo-Politics to Drive the Markets

On the Macro

For the Dollar, key stats through the week include the FED’s preferred inflation figures due out on Monday alongside personal spending, October’s CB Consumer Confidence number due out on Tuesday, ADP nonfarm employment change numbers for October, the market’s preferred ISM manufacturing PMI numbers for October, which are released alongside 3^rd quarter productivity and unit labour cost numbers on Thursday and the all-important labour market numbers on Friday, focus being on the NFP and wage growth figures. The Dollar Spot Index ended the week up 0.67% to $96.359.

For the EUR, it’s another busy week ahead, with 3^rd quarter GDP numbers out of France, Spain and the Eurozone, prelim October inflation numbers out of Spain, Germany, Italy and the Eurozone, consumer spending numbers out of France and Germany and German unemployment figures out ahead of Friday’s finalized October manufacturing PMI numbers, with focus likely to remain on Germany’s stats, though a forecasted contraction in Italy’s manufacturing sector will yet another alarm bell for the Eurozone economy. The EUR/USD ended the week down 0.96% to $1.1403.

For the Pound, stats are limited to manufacturing and construction PMI numbers due out on Thursday and Friday, and October house price figures due out on Thursday. Focus will be away from the numbers, the autumn budget on Monday and Super Thursday’s BoE policy decision, inflation report and Carney’s press conference the main events, with Brexit also there to influence. The GBP/USD ended the week down 1.9% to $1.2828.

For the Loonie, economic data includes August GDP and September’s RMPI numbers on Wednesday and September trade and October labour market numbers on Friday, positive numbers expected to fuel speculation of another rate hike near-term. The Loonie ended the week down 0.02% to C$1.3106 against the U.S Dollar.

Out of Asia, it’s a busy week ahead.

For the Aussie Dollar, 3^rd quarter inflation and September’s private sector credit numbers on Wednesday, September’s trade data on Thursday and 3^rd quarter wholesale inflation numbers and September retail sales figures on Friday will be the key drivers on the data front. The AUD/USD ended the week down 0.41% to $0.7090.

For the Japanese yen, September retail sales and employment figures on Monday and Tuesday and September’s industrial production figures on Wednesday are the only material stats due out, with the BoJ’s October monetary policy decision on Wednesday being the main event of the week. The Japanese Yen ended the week up 0.57% to ¥111.91 against the U.S Dollar.

For the Kiwi Dollar, stats are limited to September building consents and October business confidence figures scheduled for released on Wednesday, with the business confidence numbers the key driver from a data perspective, while market risk sentiment and numbers out of China will likely overshadow the Kiwi data. The Kiwi Dollar ended the week down 1.4% to $0.6502.

Out of China, October’s private sector PMI numbers are due out on Wednesday and Thursday, with the Caixin manufacturing PMI on Thursday likely to be the key driver, the sector forecasted to contract for the first time since May of last year that will likely rile the markets further.

Geo-Politics

Brexit: As ever updates on Brexit will continue to be the key driver for the Pound in the week ahead, though whether there is any progress remains to be seen as the point of no return gets ever closer.

U.S – China Trade War:  Economic data out of China is expected to further reflect the effects of the ongoing trade war between the U.S and China and corporate earnings and 3^rd quarter GDP numbers out of the U.S are also beginning to show the ill effects ahead of the mid-terms. No resolution is anticipated in the week ahead, tensions likely to continue to weigh on market risk sentiment.

Italy: With the Italian budget having been rejected and the Italian coalition government back to the drawing board, there could be some chatter in the week ahead that may see spreads between German and Italian government bonds widen further, particularly if the coalition government looks to dig its heels in.

Saudi Sanctions: It was a quiet week, with MBS looking to align with the U.S on the Kashoggi murder in the interest of international relations and more. Where’s the body? is the current question being thrown around and pressure may build for the Saudis to deliver, which would ultimately let the cat out of the bag and that can’t be a good thing for the Saudis or for market risk sentiment in general.

The Rest

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

• For the GBP, its Super Thursday, with the BoE policy decision, inflation report and Governor Carney press conference in focus. Softer inflation figures in September and disappointing retail sales figures will have eased pressure on the BoE, with the outlook on inflation likely to be in the hands of Brexit, the BoE now in a holding pattern until there is some clarity on the Brexit blueprint.
• For the Japanese Yen, Wednesday’s policy decision is unlikely to deliver any surprises, with inflation continuing to fall well short of the BoJ’s objective and concerns over the global economy likely to become a key item of discussion.