The Week Ahead – Politics, Economic Data and FED Chair Powell in Focus

On the Macro

For the Dollar, After a quiet start to the week, it’s a busy second half, with key stats including finalized Markit survey PMI numbers due out on Wednesday and Friday, the market’s preferred ISM Manufacturing PMI and December’s ADP employment change figures on Thursday and the government’s labour market numbers on Friday, focus being on the ISM Manufacturing PMI and the wage growth and nonfarm payroll figures. Outside of the stats, the Government shut down will be eyed, with FED Chair Powell to also influence in a scheduled to speak at the end of the week. The Dollar Spot Index ended the week down 0.60% to $96.377.

For the EUR, economic data scheduled for release includes December private sector PMI numbers out Spain, Italy, France, Germany and the Eurozone on Wednesday and Friday, numbers out of France, Germany and the Eurozone being finalized numbers, inflation figures out of France, Italy and the Eurozone on Friday and German unemployment numbers on Friday. Key drivers will be the Eurozone’s inflation numbers, Germany unemployment figures and private sector PMI numbers, any downward revisions to prelim numbers out of France or Germany to weigh on the EUR. The EUR/USD ended the week up 0.63% to $1.1444.

For the Pound, stats scheduled for release include December’s private sector PMI numbers due out on Wednesday through Friday, with service sector numbers due out on Friday the key driver, while December house price figures will likely be brushed aside on Friday. Outside the numbers, Brexit chatter and any talk of a vote of no confidence will also need to be looked out for, the Opposition Party looking to turn up the heat. The GBP/USD ended the week up 0.43% to $1.2699.

For the Loonie, economic data scheduled for release includes December labour market numbers and November’s RMPI due out on Friday, with the labour market numbers the key driver at the end of the week. Outside of the numbers, crude oil prices will influence, a heavy set of stats due out of the U.S and China through the week expected to give the markets a sense of where the global economy stands going into the New Year. The Loonie ended the week down 0.26% to C$1.3638 against the U.S Dollar.

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

For the Aussie Dollar, stats scheduled for release are limited to November private sector credit figures due out on Monday and November’s AIG manufacturing index figures on Wednesday, which will provide direction for the Aussie Dollar. Outside of the numbers, private sector PMI numbers out of China will influence risk sentiment through the week, the numbers the key driver for the Aussie Dollar through the week. The Aussie Dollar ended the week up 0.10% to $0.7047.

For the Japanese yen, there are no material stats scheduled for release, leaving the Yen in the hands of market risk sentiment and geo-political risk through the week, economic data out of the U.S and China to influence risk sentiment along with any chatter on trade talks ahead of talks that are due to resume on 7^th January. The Japanese Yen ended the week up 0.85% to ¥110.27 against the U.S Dollar.

For the Kiwi Dollar, there are no material stats scheduled for release, leaving the Kiwi Dollar in the hands of market risk appetite and the GlobalDairyTrade price index due out on Wednesday mid-week. The Kiwi Dollar ended the week down 0.15% to $0.6718.

Out of China, private sector PMI numbers will be in focus, with the December’s numbers due out on Monday, Wednesday and Friday, the manufacturing PMIs expected to have the greatest influence on market risk sentiment through the first half of the week. Some market jitters could be alleviated if pre-7^th January chatter on trade talks provide a positive outlook on talks.

Geo-Politics

Brexit: Members of Parliament are not due back until 7^th January, giving just 1-week until the Brexit deal vote that could wreak havoc on the Pound and the broader market. Expect some chatter in the week, with calls for the members of Parliament to be recalled early needing to be monitored, the Pound likely to respond to any hint of a vote being brought forward to the coming week.

U.S – China Trade War:  Focus will now shift to the scheduled resumption of trade talks on 7^th January, with any chatter in the run up likely to influence. Trump having a tendency to lay down the extremes ahead of any talks, which would be a negative for risk sentiment.

The Rest

On the monetary policy front,

For the USD, FED Chair Powell is scheduled to speak at an economic conference, alongside predecessors Yellen and Bernanke on Friday, with any support for continued rate hikes through next year likely to weigh on risk appetite at the end of the week.