The Week Ahead – Trade, Brexit and Economic Data in Focus

On the Macro

For the Dollar, economic data for the week ahead includes September NY State and Philly manufacturing PMI numbers due out on Monday and Thursday, August building permits, housing starts and existing home sales, due out on Wednesday and Thursday, with U.S September prelim private sector PMI figures due out on Friday. Outside the stats, trade war chatter will continue to drive volatility. The Dollar Spot Index ended the week down 0.43% to $94.927.

For the EUR, key stats through the week include the Eurozone’s finalized August inflation figures on Monday, with France’s finalized 2^nd quarter GDP and September prelim private sector PMI numbers due out on Friday.  Focus will be on PMI numbers, the markets keen to gauge whether activity improved going into the final month of the 3^rd quarter. Outside of the numbers, ECB President Draghi is scheduled to speak on Tuesday and Wednesday. The EUR/USD ended the week up 0.62% to $1.1625.

For the Pound, it’s a relatively busy week ahead, key stats scheduled for release including August inflation figures due out on Wednesday and August retail sales numbers due out on Thursday, with the stats skewed to the negative, the BoE Quarterly Bulletin on Friday and Brexit updates will need to be favourable to support the Pound through the week. The GBP/USD ended the week up 1.15% to $1.3068.

For the Loonie, economic data scheduled for release includes July manufacturing sales figures on Tuesday, with all influencing August inflation and July retail sales figures on Friday. Outside the stats, the BoC review will also be released on Thursday, with progress or lack of on NAFTA to also influence. The Loonie ended the week up 0.95% to C$1.3036 against the U.S Dollar.

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

For the Aussie Dollar, stats are limited to 2^nd quarter house price figures due out on Tuesday, with the numbers unlikely to have a material impact, the release coinciding with the rollout of the RBA meeting minutes that could provide further support for the Aussie Dollar. The AUD/USD ended the week up 0.65% to $0.7153.

For the Japanese yen, stats through the week are limited to August trade data, due out on Wednesday, with August inflation figures and September prelim manufacturing PMI numbers due out on Friday. Focus will be on trade and inflation figures, as the markets and the Japanese government prepare for initial trade talks with the U.S. Outside of the data, Wednesday’s BoJ interest rate decision will also provide direction, though market risk appetite may ultimately overshadow the economic calendar. The Japanese Yen ended the week down 0.96% to ¥112.06 against the U.S Dollar.

For the Kiwi Dollar, stats through the week are limited to 2^nd quarter current account figures due out on Wednesday, a widening in the deficit a negative for the Kiwi ahead of Thursday’s 2^nd quarter GDP numbers that are forecasted to be Kiwi positive and could provide further upside, though much will depend on market risk appetite and trade war chatter through the week. The Kiwi Dollar ended the week up 0.58% to $0.6572.

Out of China, with no material stats scheduled for release, the markets will be looking for the finer details on when trade talks are set to resume and whether Trump will go ahead with Friday’s decision to proceed with tariffs on an additional $200bn of Chinese goods ahead of talks.

Geo-Politics

Brexit: Undeniably the greatest influence on the Pound at present, the markets can expect more Brexit chatter and movement in the Pound through the week.

Loonie Woes: NAFTA in the balance and Trump’s patience likely to be wearing thin. Could the U.S just pull out and slap Canada with tariffs to motivate the government into action?

U.S – China Trade War:  Never ending, with hopes of talks to resume likely to be tested as Trump calls for tariffs on $200bn worth of Chinese goods to be rolled out ahead of any resumption of talks.

Iran: The latest threat by the U.S on harsh action on nations who breach U.S sanctions on Iran could heat things up in the week ahead. For now, some hot air, but as the November deadline nears, things could get messy. Expecting Europe to step up may be wishful thinking on Iran’s part, the EU desperate to avoid U.S tariffs, let alone U.S retribution.

Turkey: Rates hiked with vigour, but it may not be enough with the U.S President more than capable of riling the Turkish Lira with more threats at the push of a tweet.

The Rest

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

• For the EUR: A couple of Draghi speeches through the week will be the main area of focus, though it would be surprising for the ECB President to talk it up following last Thursday’s hawkish biased press conference.
• For the Japanese Yen: The BoJ meet on Wednesday will be an interesting one… Focus will likely be on the possible effects of trade tariffs on the Japanese economy. Members will need to take care not to appear to be meddling with the Yen to deliver more favorable trade terms ahead of official trade talks begin with the U.S. Some possible talk of a need to adjust its current range for 10-year bond yields and the effect of the recent Typhoon and earthquake will also be on the agenda. Stats have been impressive of late, but things could deteriorate rapidly.
• For the U.S. Dollar, FOMC members entered the September blackout period on Saturday, that runs through to 27^th September’s anticipated rate hike, leaving the Dollar in the hands of the stats and the Oval Office.