A Political and Economic Concoction Scheduled Today in the US
This week looks set to take investors on a roller-coaster ride with a perfect dose of political and economic events packed together. Democrat Hillary Clinton and Republican Donald Trump square off today in their first televised debate, as they sit neck and neck in the polls. In the US economic calendar, new home sales, the Dallas Fed index and a speech by the Federal Reserve’s (Fed) Daniel Tarullo are all scheduled for today.
In the UK, the just released data showed that the nation’s BBA mortgage approvals dipped further in August. The German Ifo survey delivered an upbeat tone across all of its components during the current month. European Central Bank (ECB) President, Mario Draghi, and ECB board member, Ewald Nowotny, will deliver speeches later today.
Pound Sterling – UK Markets
The Pound is trading lower against the US Dollar and the Euro this morning. The just out data showed that UK’s BBA mortgage approvals continued its downward trend in August. The most significant data for Sterling this week will be the first revision of Britain’s second quarter GDP. The preliminary GDP result surprised markets by coming in better than expected. It remains to be seen whether that upbeat momentum continues in the latest reading. Although the indicator does not cover much of the period after Brexit, it still reflects the high degree of uncertainty prevalent during the run up to the vote, and thereby represents a barometer of how the UK economy survived under uncertain conditions. Additionally, Britain’s consumer confidence and total investment for the second quarter are also scheduled to release this week.
On Friday, Sterling drifted lower against its major peers after UK’s Foreign Secretary, Boris Johnson, suggested that Britain’s formal withdrawal process from the European Union could begin early next year.
US Dollar – US Markets
The greenback is trading mixed against the Pound and the Euro this morning. Later today, the US new home sales data and the Dallas Fed manufacturing business index will be in focus. US Fed Chairwoman, Janet Yellen, is scheduled to testify before the Committee on Financial Services and the US House of Representatives later this week.
On Friday, the US Dollar traded higher against most of its major peers, amid hawkish comments from the Boston Fed President, Eric Rosengren. He stated that the Fed should start gradually increasing the interest rate now, and warned that a fall in the unemployment rate below its sustainable level could derail economic recovery in the nation. His words renewed market expectations for a rate rise soon. On the macroeconomic front, US manufacturing activity grew at its slowest pace in 3 months in September, due to a fall in new orders.
Euro – European Markets
This morning, the shared currency looks to extend last week’s positive momentum against the greenback, trading above the crucial 1.12 handle. Data released earlier during the session showed that the German Ifo business climate index surpassed investor expectations this month and rose to its highest level since July 2014. Additionally, the nation’s current assessment and business expectations indices advanced above expectations in September. Separately, Italy’s seasonally adjusted retail sales unexpectedly edged down in July, doing little to help the country’s stalling economic recovery.
Investors look forward to a speech by the ECB President, Mario Draghi, scheduled later today. The ECB Chief held a public appearance last week, but dodged monetary policy topics. This time will probably be a different scenario as he will face a question and answer session after the speech, which will definitely feature questions regarding the central bank’s monetary stimulus measures. ECB governing council member, Ewald Nowotny, is also scheduled to deliver a speech today.
Other Currencies – Highlights
The Kiwi Dollar has lost ground against the US Dollar this morning. Data wise, this week kicks off on a sombre note for New Zealand after government figures showed the largest monthly trade deficit in 2 years in August. The nation’s exports fell during the month, as milk powder exports fell to a 7-year low level and meat exports also waned. Looking ahead, a light economic calendar this week will provide some breathing room for the Kiwi Dollar. Statistics New Zealand will report on building permits later in the week, giving market participants new insights into the country’s construction sector. Separately, the Australia New Zealand Bank will release its latest business confidence survey for August.
On Friday, the Kiwi Dollar ended lower against the greenback for the second consecutive session, dropping to a 4-week low, amid growing speculation that the Reserve Bank of New Zealand will slash the official cash rate at its November monetary policy meeting.