The Week Ahead – Monetary Policy and Geo-Politics to Influence, as Earnings Roll Out

On the Macro

For the Dollar, stats for the week ahead include prelim October private sector PMI and September new home sales figures on Wednesday, September durable goods, trade data and pending home sales figures on Thursday, ahead of finalized October consumer sentiment numbers and the all-important 3^rd quarter GDP numbers on Friday, which will be the main event for the Dollar. FOMC member speeches through the week will also influence. The Dollar Spot Index ended the week gained 0.52% to $95.713.

For the EUR, stats are on the heavier side and include consumer confidence figures on Tuesday, prelim October private sector PMI numbers on Wednesday and consumer and business confidence figures on Thursday, with the stats likely to have a material impact on the EUR ahead of Thursday’s ECB monetary policy decision and all-important press conference. Wholesale inflation numbers out of Germany on Tuesday and labor market figures out of France on Thursday are unlikely to have a material impact. The EUR/USD ended the week down 0.4% to $1.1514.

For the Pound, stats are on the lighter side, October CBI Industrial Trend Orders on Tuesday likely to have some influence, though it will ultimately boil down to Brexit chatter through the week, UK gross mortgage approval numbers on Wednesday unlikely to impact. The GBP/USD ended the week down 0.59% to $1.3076.

For the Loonie, economic data is limited to August wholesale sales figures that will provide some direction, though the focus will be on Wednesday’s BoC policy decision and press conference. The Loonie ended the week down 0.61% to C$1.3104 against the U.S Dollar.

Out of Asia, it’s a particularly quiet week ahead.

For the Aussie Dollar, with no material stats scheduled for release through the week, the RBA’s Debelle, Boulton, and Bullock are scheduled to speak in the early part of the week, any policy chatter to provide direction. The Aussie Dollar will ultimately be in the hands of market sentiment towards the global economic outlook and whether the U.S imposes sanctions on the Saudis, with the ongoing trade war between the U.S and China also there to consider. The AUD/USD ended the week up 0.07% to $0.7119.

For the Japanese yen, key stats through the week are limited to October’s Tokyo inflation numbers that are unlikely to have a material influence on the Yen on Friday, with market risk sentiment to provide direction, geo-politics continuing to plague the markets as the U.S mid-terms approach. The Japanese Yen ended the week down 0.30% to ¥112.55 against the U.S Dollar.

For the Kiwi Dollar, economic data is limited to September trade figures due out on Thursday that will certainly provide the Kiwi Dollar with direction, with positive numbers in the wake of last week’s 3^rd quarter inflation figures supporting a run at $0.67 levels. The Kiwi Dollar ended the week up 1.34% to $0.6594.

Out of China, there are no material stats scheduled for release to influence the markets through the week, leaving the ongoing trade war with the U.S and the direction of the Yuan to play a hand in market risk appetite.

Geo-Politics

Brexit: A lack of progress at the EU Summit last week will see pressure build on the Pound and the UK government to find a solution to the Irish Border puzzle that has been touted as the likely iceberg to sink Britain’s Brexit plans. Friction within the UK government over Brexit will likely add to the Pound’s troubles, EU negotiators attempt at cooling market fear of a no deal failing to translate into progress.

U.S – China Trade War:  The trade war continues with no end in sight, Trump in no position to back down ahead of the mid-terms, with the prospects of tariffs rising from 10% to 25% on $200bn at the start of next year becoming all the greater. With the Chinese economy seeing the slowest growth since 2009, the Chinese government will be looking to restore confidence, while demonstrating an unwillingness to back down.

Italy: The EU Commission may be attempting damage limitation, a new tact following the lessons learned from the Greek debacle of 2015, but it may not just be the EU Commission that disrupts the markets, with ECB President Draghi vocal about the budget and discord within the coalition also there to influence the EUR in the week ahead.

Saudi Sanctions: Following the admission of Kashoggi’s murder in the Saudi consulate, how the U.S responds to the admission will have an influence on crude oil prices and risk appetite across the broader market, disruption in the Middle East an unwanted outcome for all concerned.

The Rest

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

• For the EUR, the ECB monetary policy decision on Thursday and the more influential press conference will have the markets looking for any shift in policy, as concerns over the European economy grow. Any comments on the Italian budget and the European Commission’s position will also be a factor. Following on from Thursday, there may be more from Draghi in a scheduled speech on Friday.
• For the Loonie, the BoC monetary policy decision and press conference on Wednesday will be of material influence. While rates are expected to remain unchanged, a hawkish press conference, policy report and rate statement could set the Loonie up for a rally, now that trade talks with the U.S have been wrapped up. Will there be any concerns over the economic outlook, with recent stats out of Canada having been skewed to the negative and the annual rate of core inflation has come in at a softer 1.5% for September?
• For the U.S. Dollar, a slew of FOMC member speeches through the week will provide the Dollar with further direction, any hawkish chatter on policy likely to fuel concerns over a more aggressive rate path following last week’s FOMC meeting minutes. Members Mester, Bostic, Bullard, Evans and Kashkari are scheduled to speak.