The Week Ahead – Trade, Brexit, Central Banks and Trump in FocusAfter a choppy start to the year, its a big week ahead, with trade talks, the U.S government shut down, Brexit and Central Bank chatter in focus.
On the Macro
For the Dollar, it’s back into the swing of things following last week’s labour market numbers, with key stats through the week including December’s ISM non-manufacturing PMI and November factory order figures due out on Monday, November job opening figures due out on Tuesday, trade data and the weekly jobless claims figures on Thursday and December inflation figures due out on Friday. Monday and Friday’s numbers will be the key drivers for the Dollar, though we can expect plenty of influence from the Oval Office as U.S officials resume trade talks with China. On the policy front, FOMC Member and FED Chair speeches and the FOMC meeting minutes will also provide direction, as will any updates on the government shutdown. The Dollar Spot Index ended the week down 0.19% to $96.198.
For the EUR, economic data is on the lighter side but of influence, with stats including November factory orders out of Germany and retail sales out of Germany and the Eurozone on Monday, German industrial production numbers on Tuesday and Germany’s trade data and the Eurozone’s unemployment rate on Wednesday. We can expect focus to be on the stats out of Germany through the week. Outside the numbers, the ECB meeting minutes on Thursday will also be of influence. The EUR/USD ended the week down 0.43% to $1.1395.
For the Pound, it’s a relatively busy week on the data front, with stats including December house price figures due out on Monday, December’s BRC retail sales monitor and RICS House Price Balance on Thursday and November GDP, industrial and manufacturing production and trade figures on Friday. While we would expect Friday’s stats to have the greatest influence on the Pound, a week of parliamentary debate on the Brexit deal, ahead of Monday 14th’s vote, will likely seal the fate of the Pound through the week. The GBP/USD ended the week up 0.19% to $1.2723.
For the Loonie, stats through the week include December’s Ivey PMI on Monday, November trade data on Tuesday and, of less significance, housing sector figures through Wednesday and Thursday. On the data front, the Ivey PMI and trade figures will have the greatest impact, with the stats due out ahead of the Bank of Canada’s first interest rate decision of the year on Wednesday that will be the key driver for the week. The Loonie ended the week up 1.94% to C$1.3374 against the U.S Dollar.
Out of Asia, it’s a busier week ahead.
For the Aussie Dollar, economic data scheduled for release includes December’s AIG Manufacturing Index on Monday, November trade data on Tuesday, building approval numbers on Wednesday and November retail sales figures on Friday. Focus will be on the trade and retail sales figures on the data front, while trade talks between the U.S and China will also impact the Aussie Dollar through the week. The Aussie Dollar ended the week up 0.94% to $0.7113.
For the Japanese yen, economic data scheduled for release is on the lighter side, with stats limited to November household spending and current account figures due out on Friday. While the household spending figures will give some guidance on how the 4th quarter is looking, the direction in the Yen will ultimately be hinged on U.S – China trade talks and sentiment towards the global economy. The Japanese Yen ended the week up 1.60% to ¥108.51 against the U.S Dollar.
For the Kiwi Dollar, key stats through the week are limited to November building consents that will likely be brushed aside by the markets, with focus hinged on U.S – China trade talks and ultimately the global economic outlook. The Kiwi Dollar ended the week up 0.21% to $0.6732.
Out of China, economic data is limited to December inflation figures due out on Friday. The stats will have limited to no impact on the global financial markets, with the resumption of trade talks between the U.S and China from Monday being the key driver through the week.
Brexit: Members of Parliament return to thrash out the Brexit deal, chatter from parliament the key driver through the week, the Pound likely to be under significant pressure should the chances of a favourable vote diminish further, a vote against also likely to raise the prospects of a vote of no confidence against the Tories.
U.S – China Trade War: Trade talks kick off and risk sentiment will be hinged on updates from talks, any hint of more tariffs and expect the markets to hit the panic button.
On the monetary policy front,
For the Loonie, Wednesday’s Bank of Canada policy decision will be in focus and, while forecasts are for the BoC to hold, forward guidance will be key, concerns over the slide in crude oil prices and the ongoing trade war between the U.S and China factors that could pin back the BoC to a relatively dovish statement. The rate statement and meeting minutes will be the area of focus.
For the U.S Dollar, FOMC member speeches through the week and a scheduled FED Chair speech on Thursday will be particularly influential, with Wednesday’s release of the FOMC meeting minutes unlikely to have too much impact following last Friday’s Powell comments.
For the EUR, the ECB meeting minutes on Thursday will be in focus, the minutes unlikely to too supportive of the EUR.