The Week Ahead: Monetary Policy, Stats and Geopolitics In Focus
Bob Mason
On the Macro
For the Dollar:
It’s a quieter week ahead on the economic calendar, following a relatively busy week last week.
After a quiet start to the week, July existing home sales are due out of the U.S on Wednesday. Any moves in response to the figures will likely be short-lived.
The focus will then shift to prelim private sector PMI numbers and the weekly jobless claims figures due out on Thursday.
While we expect the prelim service PMI to be the key driver, expect the Dollar to react to any dire manufacturing sector numbers.
On Friday, new home sales figures will also likely have a relatively muted impact on the Dollar.
Outside of the numbers, the FOMC’s meeting minutes are due out on Wednesday and will likely have the greatest impact on the Greenback.
The markets will be looking for any indication on whether the FED is likely to cut rates further before the year-end. FED Chair Powell, due to speak on Friday will have a material impact.
There is also the Jackson Hole Economic Symposium to consider late in the week. Updates and key speeches will influence on Thursday and Friday.
The Dollar Spot Index ended the week down up 0.73% to $98.203.
For the EUR:
It’s another relatively busy week ahead on the economic data front.
The Eurozone’s July inflation figures kick the week off. Barring any deviation from prelim numbers, the focus will be on the headline month-on-month figure.
Market focus will then shift to August prelim private sector PMI numbers due out on Thursday. Expect the German manufacturing PMI and the Eurozone’s composite PMI to be the key drivers.
Service sector activity will need to provide support, however. Slower growth in services and expect risk aversion to hit.
Outside of the numbers, the ECB monetary policy meeting minutes will also provide direction on Thursday.
The EUR/USD ended the week down by 0.99% to $1.1090.
Key stats are limited to August’s CBI Industrial Trend Orders, which is due out on Tuesday. With the stats on the lighter side, we can expect the Pound to be sensitive to the Tuesday figure.
Outside of the stats, expect the Pound to remain susceptible to any Brexit chatter.
The GBP/USD ended the week up by 0.96% to $1.2149.
June manufacturing sales figures are due out on Tuesday, which is forecasted to be Loonie positive.
The market focus will then shift to July inflation numbers due out on Wednesday. As market jitters over the global economic outlook linger, softer inflation figures would weigh heavily on the day.
June wholesale sales figures due out on Thursday will likely have a muted impact on the Loonie ahead of June retail sales figures due out on Friday.
Another slide in retail sales figures would raise the prospects of a Bank of Canada rate cut next month.
The Loonie ended the week down 0.36% to C$1.3269 against the U.S Dollar.
Out of Asia
For the Aussie Dollar:
It’s a quiet week ahead on the Economic data. Data is limited to 2nd quarter construction work done that will have limited impact on the Aussie Dollar.
The lack of stats will leave the markets to focus on the RBA meeting minutes that are due out on Tuesday.
Following a more hawkish than anticipated RBA Rate Statement, the markets will be looking for any hints of a near-term rate cut. Following 2 consecutive rate cuts earlier in the year, talk of standing pat would be Aussie Dollar positive.
On the geopolitical front, expect the U.S – China trade war and the PBoC setting of the Yuan to also influence.
The Aussie Dollar ended the week down by 0.10% to $0.6779.
Economic data due out of Japan includes July trade data, due out on Monday, private sector PMI numbers on Thursday and July inflation figures due out on Friday.
We expect the trade figures to have an impact on Monday. With inflationary pressures unlikely to build anytime soon, Friday’s numbers will likely have a muted impact.
With the U.S – China trade war weighing on the global economy, Japan’s service sector will need to avoid a slowdown…
Outside of the stats, market sentiment towards trade and the global economy will continue to be the key driver.
The Japanese Yen ended the week down 0.65% to ¥106.38 against the U.S Dollar.
For the Kiwi Dollar:
It’s another quiet week ahead following last week’s RBNZ surprise move.
Key stats are limited to 2nd quarter wholesale inflation figures due out on Monday and 2nd quarter retail sales figures due out on Friday.
Expect both sets of numbers to provide the Kiwi Dollar with direction.
Outside of the stats, trade war chatter will continue to be of influence.
The Kiwi Dollar ended the week down 0.60% to $0.6429.
Out of China:
It’s a quiet week ahead on the economic data front. There are no material stats due out of China.
Updates from the U.S – China trade talks will also continue to drive the markets.
Barring any chatter from Beijing, it will ultimately boil down to the PBoC’s setting of the Yuan throughout the week.
The Yuan ended the week up by 0.28% to CNY7.0428 against the Greenback.
Geo-Politics
Italy Snap General Election: Salvini called for a snap general election and it may have backfired. The Five Star Movement found the support of the Democratic Party to fend off the prospects of a right-wing League government. Expect more chatter in the week ahead.
Trade Wars: China ramped up soybean imports from Brazil and brushed aside Trump’s olive branch. There could be more pain in the week ahead…
UK Politics: Corbyn’s on a mission to oust Boris Johnson and quash the threat of a no-deal departure from the EU. News of Boris Johnson plans to meet with Macron and Merkel is positive, though it will boil down to the outcome. The British PM will need to take a softer approach for Macron to consider any deviation from the EU’s current stance…
Iran: No news continues to be good news for now. Things could escalate quickly, however… The U.S issued a warrant to seize Iran’s Grace 1 Supertanker, which was released before the warrant was issued.
The Rest
Monetary Policy:
FED: The FOMC meeting minutes due out on Wednesday will be of particular interest. While economic data remains relatively upbeat, the markets are expecting the FED to provide support. Will the minutes be aligned with market expectation?
At the end of the week, FED Chair Powell is scheduled to speak, who may shed some color on what’s to come.
ECB: The ECB is also releasing its monetary policy meeting minutes, which are due out on Thursday. Following dovish monetary policy chatter last week that sunk the EUR, we can expect the EUR to be sensitive to the minutes. Any more dovish chatter in the week ahead, however, would be of greater influence.
Jackson Hole Symposium: This year’s symposium will have a material impact on the global financial markets. Central banks have begun to talk of negative rates as the global economy hits speed bumps amidst the U.S-China trade war. Updates from the Symposium on Thursday and Friday will need monitoring.
