Investors Brace Themselves for A Whirlwind Week
This week is a crucial one for the global economy. Apart from data releases, this week will also see several central bank activities and US election-related news. The Bank of England’s (BoE) latest interest rate decision and inflation report is widely awaited. In the US, the Federal Reserve (Fed) will dominate headlines throughout the week. A rate increase this week by the Fed policy-setting committee is less likely given the proximity of the US presidential election date. In the background, the US election saga will continue attracting attention. Democrat representative, Hillary Clinton, had been cruising to victory in the US Presidential election last week, until email-gate controversy raised its ugly head again.
In the UK, the just out data showed that consumer credit rose less than expected in September. In the Eurozone, third quarter GDP and consumer price index data for October are due.
Pound Sterling – UK Markets
The Pound is trading mixed against its major peers this morning. The just released data showed that UK’s net consumer credit dropped in September. On the other hand, the nation’s mortgage approvals advanced to a 3-month high level during the same period. Earlier in the session, Britain’s Lloyds business barometer posted a robust rise for October. Looking ahead, UK’s most crucial event this week is the BoE’s interest rate decision and quarterly inflation report. Britain’s BRC shop price index, manufacturing and services purchasing managers’ indices data are also due this week.
Investor focus will be directed at the BoE Governor, Mark Carney, this week. Over the weekend, a report by the Financial Times stated that the central bank Chief is ready to serve a full eight-year term at the BoE. If the story stands true, it is a harbinger of stability during a period of uncertainty for the UK economy. An opportunity to clarify the same will come this week when he is due to present the bank’s latest forecasts for growth and inflation.
US Dollar – US Markets
The US Dollar weakened against the Pound and the common currency on Friday. The final reading on the Reuters/Michigan consumer sentiment index in the US was revised lower in October, notching its lowest level since 2014, with Americans less optimistic about both current and future conditions before the Presidential election. On the data front, US economy grew more than anticipated in the third quarter of 2016, expanding at its fastest pace in two years, as a surge in soybean exports and a rebound in inventories offset a slowdown in consumer spending. In other economic news, the annual growth in personal consumption slowed more than expected during the same period. Meanwhile, the Federal Bureau of Investigation (FBI) announced that it is investigating new emails related to Presidential nominee, Hillary Clinton.
The greenback is trading higher against most of its major counterparts this morning. Later today, market participants will keenly watch US personal spending and income data along with the Chicago purchasing managers’ index (PMI) for further cues surrounding the US Dollar.
Euro – European Markets
The shared currency is trading lower against the US Dollar and the Pound this morning, after data showed that German retail sales surprisingly declined in September, falling for the second consecutive month and registering its steepest drop in two years. This dampened hopes that private consumption will continue to support growth in the Eurozone’s largest economy. Meanwhile, Spanish retail sales rose on an annual basis in September. Low inflation and falling unemployment have fueled a consumer spending boom in Spain, helping to keep the nation’s growth on track, despite a ten-month political gridlock. Going ahead, the Eurozone’s third quarter GDP and CPI data for October is scheduled to release in a few hours.
On Friday, the Euro region’s economic sentiment index for October surpassed investor expectations to reach its highest level this year, amid marked increases in confidence in the services and construction sectors. Further, the nation’s business climate index marginally rose during the same month, as managers' production expectations and their assessments of export order books improved sharply.
Other Currencies – Highlights
The Canadian Dollar has reversed its previous session losses and is trading on a stronger footing against the greenback this morning. This week looks pretty busy for the Canadian Dollar with a plethora of economic data-points lined up. The most crucial of the lot is Canada’s GDP data for August which is expected to reveal a slower growth in comparison to the previous month’s reading. Apart from this, investors also await the nation’s RBC manufacturing PMI, unemployment rate and the Ivey purchasing managers index data along with a speech by the Bank of Canada (BoC) Governor, Stephen Poloz.
Lately, the Canadian Dollar has dissociated itself from crude oil prices and turned sensitive to comments from top-notch government officials and central bank chiefs. Market participants dissect each word spoken by them, which leads to high volatility. Just a week back, an “18-month” remark by the BoC Governor, Stephen Poloz, had whipsawed the Canadian Dollar. The level of volatility diminished only after he clarified that it was not related to monetary policy, but was about the nation’s output gap.