This Week’s Scottish Referendum in Spotlight

The Scottish referendum is expected to steal the limelight this week, especially after a series of poll surveys over the weekend revealed that results surrounding independence remains too close. Against this backdrop, investors will keenly scrutinise forthcoming poll surveys and headlines ahead of the vote scheduled on Thursday. Additionally, this week’s domestic inflation and labour market data along with the minutes of the BoE policy meeting will keep traders interested, although it might be overshadowed by news flow surrounding the Scottish referendum. With the US Fed drawing close to conclude its QE programme, it will be interesting to see whether the central bank makes any change to its forward guidance at its monetary policy meeting scheduled later this week.

Pound Sterling – UK Markets

The Pound is trading in a tight range against the majors this morning amid uncertainty surrounding the Scottish referendum. Sterling investors are likely to remain cautious in the upcoming trading sessions, especially after a series of poll surveys over the weekend indicated that the result of the Scottish independence remains too close. The outcome has the potential to have a bearing on the medium term prospects of Sterling, especially considering the political and economic impact on the UK arising out of the referendum outcome. Apart from headlines and opinion polls related to Scotland’s independence vote, investors will keep a close watch on today’s string of US macro data for further direction. Separately, data released by Rightmove over the weekend revealed that house prices in the UK rose for September. Given the importance of inflation and wage growth in deciding the future course of monetary policy, this week’s UK inflation and labour market data will prove crucial for Sterling investors. Additionally, the latest BoE policy meeting minutes will be keenly watched for any signs of further dissent among policymakers over a hike in interest rates.

US Dollar – US Markets

The greenback failed to register gains against the majors on Friday despite the release of upbeat US economic data. The preliminary reading of the Reuters/Michigan survey showed a more than expected improvement in consumer confidence for September. Additionally, retail sales growth in the US improved to a five month high for August, despite the recent labour market data showing signs of fatigue in the sector. The encouraging economic performance has bolstered prospects of a sooner than expected hike in the key interest rate, especially with the US Fed’s policy meeting outcome scheduled later this week. The US Dollar is likely to remain supported against the majors today, as weak macro data released in China over the weekend has heightened concerns over fragile growth in the nation. Going forward today, US industrial production data is expected to show a slowdown in domestic activity for August, despite the recent ISM survey indicating that the pace of manufacturing activity reached a multi-year high. Additionally, the New York Fed manufacturing activity survey will be eyed to gain an early insight into the state of manufacturing activity for September.

Euro – European Markets

The Euro rose against the greenback on Friday despite the release of upbeat US Reuters/Michigan consumer confidence report. Additionally, data released in the Euro zone showed that industrial output rose more than expected for July. This offered some respite to investors, especially after a stagnant growth reported during the second quarter. Additionally, the ECB Vice President hinted over the weekend that the region’s economic growth is expected to gain pace for the third quarter, but the full year’s growth might remain below the 1% mark. Meanwhile, gains in the Euro were capped after the fragile truce agreement between Russia and Ukraine took a hit amid signs of fresh violence in Ukraine. With little on the domestic economic front, the Euro is trading lower against the majors this morning following the release of soft Chinese macro data over the weekend. Markets will keep an eye on tomorrow’s German ZEW sentiment survey which is likely to show further deterioration, particularly amid concerns that the recently imposed EU sanctions against Russia might hamper the nation’s growth.

Other Currencies – Highlights

The Aussie Dollar lost ground against the greenback in Friday’s trading session. Upbeat US economic data released on Friday showed a more than expected improvement in consumer confidence, strengthening hopes of a sooner than anticipated hike in interest rates by the US Federal Reserve. Additionally, downbeat industrial production and retail sales numbers released in China over the weekend hinted that growth in the world’s second largest economy remained fragile, further pressurising the Aussie Dollar against the majors this morning. Moreover, another report released earlier today revealed that motor vehicle sales in Australia dropped for September. With no other domestic economic releases today, markets will keep a tab on the minutes of the latest Reserve Bank of Australia’s policy meeting along with the central bank’s economic bulletin for the third quarter scheduled this week. Furthermore, the US Fed’s policy meeting and consumer inflation data scheduled on Wednesday could prove crucial for the Aussie Dollar-US Dollar pair.