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The Week Ahead – Brexit, Draghi and Stats to Drive the Markets

Bob Mason

On the Macro

For the Dollar:

It’s a busy week ahead on the economic calendar, following a data-packed week last week.

August wholesale and consumer price figures due out on Wednesday and Thursday will provide the Greenback with direction ahead of a particularly busy Friday.

At the end of the week, August retail sales and September consumer sentiment figures will have an impact on the Dollar.

We would expect July’s JOLTs job openings due out on Tuesday and July business inventories and import and export price figures due out on Friday to have limited influence.

Outside of the stats, geopolitics turns a corner but leaves the U.S at the mercy of the U.S President and the extended U.S – China trade war.

On the monetary policy front, while FED Chair Powell talked up the U.S economy on Friday, the markets continue to price in a September rate cut.

The Dollar Spot Index ended the week down 0.42% to $98.394.

For the EUR:

It’s yet another busy week ahead on the economic data front.

July trade figures are due out of Germany on Monday. A marked narrowing in the trade surplus would weigh heavily on the EUR, as market concerns over the Eurozone economy linger.

The Eurozone’s industrial production figures due out on Thursday and 2nd quarter wage growth will also influence on Friday.

We would expect 2nd quarter nonfarm payroll numbers out of France to have a muted impact on Tuesday.

Barring deviation from prelims, finalized August inflation figures out of Germany, France, and Spain will also be brushed aside.

The main event of the week is the ECB’s monetary policy decision on Thursday. How far will the ECB go and will Draghi deliver a dovish press conference as he prepares to make way for Christine Lagarde?

Geopolitics will also be in focus as Boris Johnson continues to attempt a 31st October Brexit. There’s also the U.S – China trade war to consider. For now, talks are due to resume next month…

The EUR/USD ended the week up by 0.43% to $1.1029.

For the Pound:

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

July industrial and manufacturing production, GDP figures and trade data are due out on Monday.

While manufacturing production is the key driver, we can expect Pound sensitivity to the data suite on the day.

The market focus will then shift to employment figures due out on Tuesday. As the UK economy continues to struggle any sharp rise in claimant counts or rise in the unemployment rate would weigh heavily on the Pound.

Wage growth figures could add further pressure should any deterioration in labor market conditions weigh on wage growth.

While we can expect the stats to have a material impact on the Pound, Brexit chatter will continue to be the key driver.

The GBP/USD ended the week up by 1.04% to $1.2283.

For the Loonie:

It’s a relatively quiet week ahead on the data front. Economic data is limited to housing sector figures due out on Tuesday and Thursday.

Barring particularly dire numbers, the stats are unlikely to have a material impact on the Loonie.

Outside of the numbers, market risk sentiment will be key.

The Loonie ended the week up by 1.04% to C$1.3173 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a relatively quiet week ahead on the Economic data.

August business confidence and September consumer sentiment figures, due out on Tuesday and Wednesday, will be the key drivers.

July home loan numbers due out at the start of the week will also influence as the RBA looks for improvement in the housing sector.

Outside of the numbers expect any chatter on trade to also provide direction.

The Aussie Dollar ended the week up by 1.68% to $0.6846.

For the Japanese Yen:

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

2nd estimate GDP numbers for the 2nd quarter are due out on Monday. The focus will then shift to the 3rd quarter BSI Large Manufacturing Conditions Index on Wednesday. The markets will be looking for any signs of improved conditions in the sector to ease concerns over the economic outlook.

Barring deviation from prelim figures, July’s industrial production figures on Friday will likely have a muted impact on the Yen and the Nikkei.

While the numbers will influence, market sentiment towards the U.S – China trade war and Brexit chatter will continue to dictate direction throughout the week.

The Japanese Yen ended the week down 0.60% to ¥106.92 against the U.S Dollar.

For the Kiwi Dollar:

It’s another quiet week ahead. Economic data is limited to August electronic card retail sales figures and Business PMI due out on Tuesday and Friday.

A lack of stats last week supported a recovery to $0.64 levels. Dire numbers in the week ahead would likely reverse last week’s gains.

The Kiwi Dollar ended the week up by 1.20% to $0.6404.

Out of China:

It’s a relatively quiet week ahead on the economic data front. Key stats are limited to August’s inflation figures that will have a muted impact on market risk sentiment on Tuesday.

The market focus will continue to be on the U.S – China trade war. No news will be good news ahead of planned talks in October…

The Yuan ended the week up by 0.56% to CNY7.1164 against the Greenback.

Geo-Politics

Italy Snap General Election: The Five Star Movement – Democratic Party coalition is now in place. Whether the 2 extremes can find middle ground remains to be seen, however…

Trade Wars:  The markets will now have to wait until next month for trade talks to resume. With tariffs in place, however, both side will need to keep their cool to avoid another market panic.

UK Politics: After a dire first week back from the summer break for the British PM, things could get darker in the week ahead. A 2nd motion for a snap general election is expected to fail on Monday, which leaves Johnson with few options, if any, to deliver an October Brexit.

The Rest

The ECB:  It will be all eyes on the ECB on Thursday. Will Draghi throw in the kitchen sink or keep options in reserve in case the U.S and China fail to find common ground in October? It’s Draghi’s swansong, but he may not get his way as he bids to reintroduce the QE program.

The markets will be looking for a cut in interest rates and a reintroduction of the QE program in some shape or form…

This article was originally posted on FX Empire

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