The Week Ahead – Trade, the ECB, the BoE and the CBT in Focus

It’s another big week for the markets, with Trump and trade in focus, while the BoE, ECB and Central Bank of Turkey deliver policy decisions.
Bob Mason
Stock Market Risk
Stock Market Risk

On the Macro

For the Dollar, economic data for the week ahead includes July’s JOLTs job openings on Tuesday, wholesale and consumer price inflation on Wednesday and Thursday, with August retail sales and September prelim consumer sentiment figures due out on Friday. Following positive labour market stats on Friday, any uptick in inflation and jump in domestic consumption will raise expectations of 2 more rate hikes before the end of the year. The Dollar Spot Index ended the week up 0.21% at $95.339.

For the EUR, stats through the week include September economic sentiment figures for Germany and the Eurozone on Tuesday, July industrial production figures, 2nd quarter wage growth and July trade figures for the Eurozone on Friday, with finalized August inflation numbers also due out through the week. While economic sentiment figures will provide direction early in the week, the ECB monetary policy decision and press conference on Thursday and noise from the Oval Office will be the key drivers in the week ahead.  The EUR/USD ended the week down 0.42% to $1.1553.

For the Pound, A busy week ahead for the Pound, with key stats including July trade, manufacturing, industrial production and GDP numbers on Monday and labour market figures on Tuesday. Outside of the stats, Thursday’s monetary policy decision and Brexit will be of influence. The GBP/USD ended the week down 0.31% to $1.2920.

For the Loonie, stats for the week are limited to August housing starts due out on Tuesday and July house price figures on Thursday, neither of which will be of material influence, progress on NAFTA and market risk sentiment to provide direction through the week, with even a hawkish BoC unable to limit the Loonie’s losses. The Loonie ended the week down 0.93% to C$1.3161 against the U.S Dollar.

Out of Asia, it’s another relatively busy week ahead.

For the Aussie Dollar, stats include August business confidence and September consumer sentiment numbers on Tuesday and Wednesday, with August employment numbers due out on Thursday. The stats are forecasted to be skewed to the negative for the Aussie Dollar, with trade war chatter to also influence. It could be another bad week ahead. The AUD/USD ended the week down 1.14% to $0.7107.

For the Japanese yen, Key stats through the week include July current account and finalised 2nd quarter GDP numbers on Monday, tertiary industry activity index figures on Tuesday, with 3rd quarter manufacturing conditions and July industrial production numbers due out on Wednesday and Friday. Outside the numbers, the Yen may well find further support as Trump threatens more tariffs and throws Japan into the mix. The Japanese Yen ended the week up 0.04% to ¥110.99 against the U.S Dollar.

For the Kiwi Dollar, key stats through the week include August electronic card sales on Tuesday and August Business PMI numbers on Friday. While the numbers will provide some direction, trade war jitters will likely overshadow the stats, the Kiwi Dollar under pressure alongside the Aussie Dollar. The Kiwi Dollar ended the week down 1.33% to $0.6534.

Out of China, stats include August inflation numbers on Monday, new loan figures on Thursday and August fixed asset investment and industrial production numbers on Friday, which will likely be the key driver for the markets on the data front. Outside the stats any retaliation to the latest threats from the U.S would also give investors more sleepless nights.

Geo-Politics

Brexit: Brexit chatter will be key for the Pound, with mixed reports seeing the Pound on the choppier side.

Loonie Woes: NAFTA talks remain in focus and will be the key driver for the Loonie in the week ahead.

U.S – China Trade War:  The threat of more tariffs on Friday could see Beijing respond, the lack of progress at any level a concern for the global financial markets, supporting demand for the Dollar and the Japanese Yen.

Iran: Threats from Iran of resuming its uranium enrichment program will likely rile the U.S President, with Europe’s hands tied. While rising tensions are simmering under the surface, escalation is possible at any time and needs to be considered.

Turkey: A lack of progress with the U.S has left the Turkish central bank with little choice but to lift rates, with the CBT expected to hike rates on Thursday. It’s less about if and more about by how much though.

The Rest

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

  • For the EUR: The markets will be expectation a cut down on the size of the asset purchasing program, while Draghi will look to avoid a spike in the EUR, the ECB President likely to flexibility for a possible reversal should the need arise, with the ongoing trade war providing a perfect backdrop for the EUR to hold steady.
  • For the Pound, following the August rate hike, not much is expected at this week’s gathering, though the Pound could get a jolt should there be a larger number of dissenters than the usual 2. Of greater interest will be whether Carney plans to stay on to navigate the British economy through its break up with the EU.
  • For the U.S. Dollar, FOMC member chatter through the week will provide the Dollar with some direction, the markets now looking for any hint of a September and December rate hike from members speaking through the week, last week’s wage growth numbers supporting the more hawkish.

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