RBA and BoE interest rate decision in the spotlight

By leaving behind us a very active week, we orient ourselves towards next week’s events which could move the markets. In the UK the pre-elections period has started and is expected to become more intense as the elections near, yet also BoE’s interest rate decision and the release of the PMI’s for October are expected to gather interest. In the US, the confrontation in the inner US political scene is seemingly becoming more intense, while at the same time a number of financial releases could shake the USD. In the Eurozone, the single currency seems to be more data dependant and Germany’s industrial sector seems to be the epicenter of discussions. The Aussie on the other hand, could be expecting another intense week as the RBA is to release its interest rate decision, while at the same time a number of financial releases both domestic as well as from China are heavily expected to influence the currency. After BoC’s dovish interest rate decision, Looney traders could be turning their attention towards the country’s labour data and trade balance.

USD – US-Sino and financial releases in focus

The inner US political scene still makes a lot of noise and is expected to make even more as the impeachment process was approved by the US House of Representatives, in a largely partisan vote. Analysts tend to note that there is no way back for the US Congress, as it will have to proceed with the impeachment process, while pressure continues to build up for US President Trump. The US-Sino relationships seem to be going through some turbulence as the market seems to maintain its worries. A Bloomberg report on Thursday mentioned that the Chinese side seems to doubt as to whether a long-term comprehensive deal is possible, under President Trump. The report also noted that the Chinese side is concerned about the US President’s impulsive character. On the flip side the US President in one of his tweets stated that both sides are working to find a new venue in order for him and his Chinese counterpart to meet and sign a “phase 1” deal, which could include as much as 60% of a total deal. On the monetary front, the Fed released its interest rate decision on Wednesday, delivered its third consecutive cut and signalled a pause. Yet the market may not be quite convinced that the Fed’s monetary policy is in a “good place”, as Fed Chair J. Powell said. Statements made by Fed officials are expected to be scrutinized for the bank’s further intentions. As for financial releases, after the pleasant surprise for the greenback on Friday, by the NFP figure outperforming expectations, and despite the revision of the September figure, attention is expected to turn to a number of upcoming financial releases. On Monday the US factory orders growth rate for September is due out, on Tuesday the international trade balance for September is expected while the ISM non-manufacturing PMI for October is to complete the picture of economic activity started by the ISM manufacturing PMI on Friday. Afterwards, albeit a number of releases are also due out, we tend to focus on the release of the more forward-looking preliminary University of Michigan consumer sentiment for November, which is to be delivered on Friday.

GBP – BoE and PMI’s eyed

With the UK elections for December being on, political analysts, tend to expect a very intense pre-election period. UK’s PM Johnson intends to get a new start with the elections possibly strengthening his side and allowing him to get the much needed majority to pass his Brexit deal. Brexit is expected to be on the agenda, however interestingly enough the leader of the Labor Party, Jeremy Corbyn attacked the “corrupt and rigged system”. The ideological schism between the Tories and Labor seems to be more intense than ever and that mirrors in each party’s post-election schedule. Also please bear in mind that US President Trump, stated that a possible US-UK trade deal could be more difficult under Johnson’s, Brexit plan. Also the US president seems not to favour the Labor leader. As announcements are made, we could see the GBP also increasing volatility, as uncertainty may rise substantially depending on the headlines. On the monetary front, BoE’s interest decision is due out on Thursday. The bank is widely expected to remain on hold, maintaining the interest rate at +0.75%. Currently GBP OIS imply a probability of 97% for the bank to maintain the current level of rates. Also, the bank’s votes are expected to be all in that direction. In its accompanying statement the bank could be also maintaining a neutral tone as Brexit uncertainty, could still be keeping the bank’s hands tied for a possible rate hike. However, headlines coming from the press conference may force the Pound to come under strong volatility. As for financial releases pound traders are expected to keep an eye out for the release of October’s PMIs, especially the services PMI on Tuesday. Other than that, the Halifax House prices for October on Thursday could gather some interest, however probably is to be overshadowed by BoE’s interest rate decision.

CAD – Employment data out on Friday

After BoC remained dovishly on hold, it had cited external risks for the Canadian economy, however at the same time, mentioned that it would continue to monitor internal financial data, such as consumer spending and housing activity. After the GDP accelerating for August somewhat, yet missing its target next releases become even more important. The main releases for the CAD next week are expected to be the employment data for October. Should the unemployment rate rise as forecasted currently and simultanouesly the employment change figure drop, we could see the Looney weakening, as the picture of a tight Canadian labor market could start to crack. Before October’s employment data though, CAD traders are also expected to keep a close eye on the release of the trade data for September on Tuesday, the Ivey PMI for October on Wednesday and the building permits growth rate for September on Thursday.

EUR – German Data in focus

Despite the Spanish elections drawing near and being politically very interesting, we tend to note that the single currency may be more data driven next week. Having an early start, we bypass the release of the final PMI’s for October on Monday and tend concentrate on the more forward looking Sentix Investor Index for November. On Tuesday, we would like to mention the release of Eurozone’s PPI growth rates for September and on Wednesday Germany’s industrial orders growth rate and Eurozone’s retail sales growth rates, both for September. On Thursday Germany’s industrial output growth rate for September and on Friday Germany’s trade data for the same month is due out. On the monetary front, Christine Lagarde’s speech on Monday, in Berlin could gather some interest.

JPY- Safe-haven flows in the forefront

The Japanese Yen, is expected to be moved once again by safe haven flows, as the US-Sino relationships rollercoaster keeps rocking the markets. Any sign of uncertainty tends to strengthen the JPY and Gold prices, as was so clearly once again illustrated on Thursday by the prementioned release of the Bloomberg article (included in the USD analysis). On the monetary front, the release of BoJ meeting minutes about the September meeting, on Tuesday could spark some interest. It should be mentioned though that as another interest rate decision has been released by the BoJ on Thursday, we could see market reaction being rather muted. As for financial releases, albeit JPY’s reaction tends to be low key, we tend to note the release of the Services PMI for October on Thursday and the Household spending growth rate for September on Friday.

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