The Week Ahead – The ECB, the FED, the UK General Election and Trade in Focus

On the Macro

It’s another busy week ahead on the economic calendar, with 48 stats to monitor over the week.

While the stats are on the lighter side relative to the week prior, monetary policy and politics will also be in focus.

For the Dollar:

After a quiet start to the week, November inflation figures get things going on Wednesday. Following the softer Core PCE Price Index figures for October, forecasts are for the annual rate of core inflation to hold steady at 2.3%.

On Thursday, November wholesale inflation figures will also provide direction ahead of a busy end to the week.

On Friday, November retail sales and core retail sales will be in focus. With the holiday season coming up and the U.S equity markets hitting fresh highs late in the year, any weak numbers would weigh heavily on the Greenback.

October inventory numbers will also be in focus on the day.

Through the week, 3^rd quarter productivity and unit labor cost numbers on Tuesday and the weekly jobless claims figures on Friday will likely have a muted impact on the Dollar.

On Friday, import and export price index figures will play 2^nd fiddle to the retail sales figures.

Outside of the numbers, chatter on trade will continue to provide direction ahead of the FED’s final monetary policy decision of the year.

The Dollar Spot Index ended the week down 0.58 at $97.700.

For the EUR:

It’s also a busy week ahead, on the economic data.

Through the 1^st half of the week, trade data out of Germany and economic sentiment figures for Germany and the Eurozone will be in focus.

Expect Germany and the Eurozone’s ZEW Economic Sentiment figures on Tuesday to have the greatest influence.

On Thursday, the Eurozone’s industrial production figures for October are also due out. The markets will be looking for upward momentum to support the view that the economy may have turned a corner.

In the 2^nd half of the week, finalized November inflation figures out of Germany, France and Spain will likely have a muted impact on the EUR.

On the monetary policy front, ECB President Lagarde delivers her first policy decision and press conference.

Expect more calls for fiscal support as the ECB looks to shift the onus to member states.

In the week, geopolitics will also be in focus. Chatter on trade will provide direction ahead of the UK General Election on Thursday.

According to the bookies, the opinion polls and the predictors, the Tories are set to seal a majority victory and deliver on Brexit. It wouldn’t be the 1^st time that the polls have been wrong, however.

The EUR/USD ended the week up by 0.38% to $1.1060.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

October manufacturing and industrial production and trade data are due out on Tuesday.

Barring a marked widening in the trade deficit, expect the production figures to have the greatest influence.

On Thursday, the RICS House Price Balance figures for November will likely be brushed aside. It’s Election Day and the fate of Britain’s EU membership may be decided in the coming week.

Expect a rocky ride for the Pound overnight on Thursday as the results begin to trickle in…

The GBP/USD ended the week up by 1.66% to $1.3140.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

Key stats include December housing starts and October building permit figures.

Barring a material deviation from forecasts, the stats are unlikely to have too much influence on the Loonie.

Following last week’s BoC policy decision and rate statement, the markets will be looking towards stats that will influence monetary policy.

The Loonie ended the week up by 0.20% to C$1.3255 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s also a relatively busy week ahead.

NAB Business Confidence figures and Westpac Consumer Confidence figures due out on Tuesday and Wednesday will provide direction.

With the RBA continuing to highlight uncertainty over consumer spending, expect the Westpac figure to have the greatest force.

Last week, the RBA held back from discussing rate cuts, unlike in the November meeting. Concerns over the impact of rate cuts on consumer confidence ultimately led to a hold on rates. If the RBA’s view holds water, the stance on interest rates should deliver positive numbers.

House price figures due out on Tuesday will also provide direction. Upward momentum in house prices would support a pickup in consumer spending and alleviate some of the uncertainty.

Outside of the numbers, the impact of geopolitics on commodities will also influence.

The Aussie Dollar ended the week up by 1.15% to $0.6841.

For the Japanese Yen:

It’s a busier week than usual on the economic calendar.

Key stats include finalized 3^rd quarter GDP numbers on Monday and BSI Large Manufacturing Index figures for the 4^th quarter on Wednesday.

The focus will then shift to the Tankan survey numbers that are due out on Friday.

With the U.S – China trade war in full swing, in spite of ongoing talks, the numbers may reflect the negative conditions across the manufacturing sector in particular.

Outside of the stats, the impact of geopolitics on risk sentiment will also be key.

The Japanese Yen ended the week up by 0.83% to ¥108.58 against the U.S Dollar.

For the Kiwi Dollar:

It’s a quiet week ahead on the economic calendar. Economic data is limited to November electronic card retail sales on Wednesday and Business PMI numbers on Friday.

Expect the numbers to have a material influence on the Kiwi. The RBNZ has held back from another rate cut. Any dire numbers and expect the chances of a rate cut to build going into the New Year.

The Kiwi Dollar ended the week up by 2.24% to $0.6566.

Out of China

It’s a quiet week on the economic data front. November inflation figures are due out, which will have a muted impact on market risk appetite.

With the U.S due to roll out fresh tariffs on the 15^th December, the markets are going to need some good news…

The Yuan ended the week down by 0.03% to CNY7.0349 against the Greenback.

Geo-Politics

Impeachment: While it is worth keeping an eye on proceedings, continued Republican support leaves the chances of Trump being thrown out of office limited at best.

In the week ahead, Trump’s impeachment is expected to go ahead… We can expect Trump’s Twitter account to be particularly active. It remains to be seen, who will fall victim to Trump’s ire…

Trade Wars: Still no end in sight. The only positive was China’s more measured retaliation to Trump signing the HK Bills. Both sides are likely to be eager to deliver a phase 1 agreement before the end of the year.

For the U.S administration, a positive on the trade front would distract the markets from the anticipated impeachment.

With the U.S – China negotiations reportedly close to a conclusion, Trump has already shifted focus to the EU and LatAm.

Expect any widening of the trade war net to test risk appetite in the week.

UK Politics: It’s the week of the UK General Election. Pound volatility will likely spike, with results from constituencies due to start trickling in late in the European session on Thursday.

The Pound has chosen Boris Johnson, so expect a tumble should early results see the Tories lose key seats. Marginal seats are expected to decide the outcome of the election…

Monetary Policy

ECB: No surprises are expected on Thursday, which makes the press conference the key driver on the day. It will be Lagarde’s 1^st delivery that should garner plenty of attention. Anticipate calls for member state governments to loosen the purse strings to be the theme.

FED: The markets are not expecting any surprises, in spite of some mixed numbers out of the U.S last week. An upward revision to 3^rd quarter growth has given the FED more breathing space. While the hold is expected, there will be some uncertainty over the economic projections.

Are the FOMC members aligned with FED Chair Powell’s positive outlook? Nonfarm payroll and wage growth figures would have provided some relief after disappointing private sector PMIs last week.

This article was originally posted on FX Empire

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