The Week Ahead – Geo-Politics to Reign Supreme

On the Macro

For the Dollar, economic data through the week includes September wholesale inflation numbers on Wednesday, September consumer inflation and the weekly jobless claims numbers on Thursday, with September import and export prices and prelim October consumer sentiment numbers due out on Friday. Outside the stats, FOMC member chatter and trade will be in focus, with the mid-terms also likely to begin garnering some attention. The Dollar Spot Index ended the week up 0.52% to $95.624.

For the EUR, it’s also a relatively quiet week, with German industrial production and trade figures due out on Monday and Tuesday, finalized September Eurozone member state inflation numbers due out on Thursday and Friday and the Eurozone’s industrial production numbers due out on Friday, focus being on Germany’s industrial production and trade data in the early part of the week. Outside of the stats, the ECB’s monetary policy meeting minutes will be sliced and diced on Thursday. The EUR/USD ended the week down 0.69% to $1.1524.

For the Pound, economic data for the week ahead include September’s BRC retail sales monitor on Monday and House price figures on Friday that will have a limited impact on the Pound, with the focus being on August industrial and manufacturing production figures and GDP estimates due out on Wednesday alongside August trade figures. Outside of the stats, Brexit will continue to be the key driver. The GBP/USD ended the week up 0.68% to $1.3120.

For the Loonie, it’s a quiet week ahead, with key stats limited to housing starts, building permit and house price figures scheduled for release on Tuesday through Thursday. Outside of the stats, market risk appetite will provide some direction on oil prices and the Loonie, with China’s return from a week’s holiday likely to have some influence at the start of the week. The Loonie ended the week down 0.24 to C$1.2939 against the U.S Dollar.

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

For the Aussie Dollar, stats include business and consumer confidence figures due out on Tuesday and Wednesday, with home loan numbers due on Friday, the business and consumer confidence numbers expected to have a greater influence. Outside of the numbers, the RBA’s financial stability report due out on Friday will provide some further direction, though risk appetite will influence as China returns from Golden Week, with China’s trade data due out on Friday also needing consideration. The AUD/USD ended the week down 2.38% to $0.7052.

For the Japanese yen, economic data scheduled for release is limited to August current account figures due out on Tuesday and Tertiary Industry Activity Index numbers on Friday that will unlikely have a material influence, geopolitics and sentiment towards trade to dictate market risk appetite and ultimately the Yen through the week. The Japanese Yen ended the week down 0.02% to ¥113.72 against the U.S Dollar.

For the Kiwi Dollar, it’s another quiet week ahead, with stats limited to September electronic card sales on Wednesday and Business PMI on Friday, both sets of numbers likely to influence the Kiwi on release. The Kiwi Dollar ended the week down 2.66% to $0.6443.

Out of China, stats are included September’s Caixin Services PMI due out on Monday and trade data on Friday, which will provide some further guidance on the state of the Chinese economy, the numbers needing to be strong to offset the stagnation in the manufacturing sector. Outside the stats, expect trade war chatter to pick up as the Chinese markets reopen following Golden Week.

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Geo-Politics

Brexit: Brexit chatter has become more optimistic in recent days. As the clock continues to tick, the Pound could finally begin to take a run at $1.35 levels should the EU share more love, the French government seemingly on a different footing to Brussels.

U.S – China Trade War:  China returns from a week’s holiday and, with tensions with the U.S having strained further, more market disruption could be on the cards if the Chinese government continues on its current course, though Beijing may look at the USMCA and wonder whether it’s all just hot air and worth sitting down at the negotiating table.

Iran: November is around the corner and sanctions have ultimately driven crude oil prices northwards to Trump’s dismay. Iran exports are down, but has the Iranian government given in or do they have a plan?

Italy: The Italian coalition government and Brussels are on a collision course, with the budget presentation scheduled for 15^th October. We can expect more chatter and impact on government bond yields and risk appetite through the week.

North Korea: The U.S administration meet with North Korea, some further progress needed to keep the U.S President and the markets satisfied, one uncertainty being whether China decides to meddle.

The Rest

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

• For the U.S. Dollar, FOMC members scheduled to speak through the week will influence, members Bostic, Williams and Evans in the diary.
• For the Aussie Dollar, The RBA’s financial stability review will be in focus, the Aussie Dollar under the hammer in recent weeks, with little support coming from the RBA.
• For the EUR, the ECB’s monetary policy meeting minutes could provide some EUR support should there be any talk of an anticipated pickup in inflationary pressures, Draghi eluding to such a view in the weeks after the policy press conference.

On the Oil Front, OPEC and the IEA’s monthly reports are due out on Thursday and Friday respectively. While the markets have continued to focus supply, a slide in exports from Iran and output from Venezuela supporting the recent upward price trend, a refocus on demand could materialize should the reports downwardly revise demand expectations. There appears to be no end in sight to the U.S – China trade war and, while things can rapidly change, some impact on the global economy is to be expected and that should mean weaker demand.