The Week Ahead: Monetary Policy, Stats and an Impeachment in Focus

On the Macro

It’s a particularly busy week ahead on the economic calendar, with a whopping 93 stats to monitor. In the previous week, just 54 stats were in focus.

We will expect the numbers to have an impact on the majors, though expect geopolitics and monetary policy to also play a hand…

For the Dollar:

Prelim December private sector PMIs get the week started on Monday. Following some disappointing ISM numbers, expect any weakness to trouble the Dollar.

On Tuesday, November industrial production figures are in focus ahead of December’s Philly FED Manufacturing PMI due out on Thursday.

Wrapping up the week, finalized 3^rd quarter GDP, November personal spending, and prelim December consumer sentiment figures are due out.

Barring dire numbers, we would expect housing figures through the week, October JOLTs job openings on Tuesday and inflation figures on Friday to have a muted effect on the Dollar.

Outside of the stats, geopolitics remains in focus. The markets will be looking for the details of a phase 1 agreement and whether there is any hope of a full-blown agreement.

There is also the little matter of Trump’s impeachment, though few if any are expecting an actual ousting…

The Dollar Spot Index ended the week down 0.54 at $97.172.

For the EUR:

It’s also a busy week ahead on the economic data, with the lion’s share of the stats due out in the 1^st half of the week.

December’s prelim private sector PMI numbers are due out of France, Germany and the Eurozone on Monday.

Expect particularly focus France’s services PMI, Germany’s manufacturing PMI and the Eurozone composite.

3^rd quarter wage growth figures for the Eurozone are also due out. Expect influence, with the ECB reliant on consumer spending to support the economy.

Trade data on Tuesday will also provide direction ahead of Germany’s Ifo Business Climate Index figures for December.

Any further weakness at the end of the year would certainly be a negative.

On Friday, consumer spending numbers from France and consumer confidence figures from Germany and the Eurozone wrap things up.

We will expect finalized November inflation figures from member states and the Eurozone to have a muted impact in the week.

On the geopolitical front, while the markets will be looking towards the U.S and China for more details, Brexit chatter returns to the news wires. Over the week, the markets will learn more about Johnson’s intentions and how receptive the EU will be.

The EUR/USD ended the week up by 0.55% to $1.1121.

For the Pound:

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

Claimant count, wage growth and unemployment numbers on Tuesday and inflation figures on Wednesday get things going.

With the BoE monetary policy decision on Thursday, the Pound’s sensitivity to the stats will likely be on the higher side.

On Thursday, November retail sales figures are also due out ahead of the BoE decision.

CBI Industrial Trend Orders on Monday and 3^rd quarter business investment and current account figures on Friday will likely be brushed aside.

With the Johnson settling into number 10 with a huge majority, expect his first moves to garner plenty of interest. The skeptics, as ever, with continue to share their 10 cents worth. So far, they’ve got it totally wrong…

The GBP/USD ended the week up by 1.45% to $1.3331.

For the Loonie:

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

Key stats include November inflation figures on Wednesday and October retail sales figures on Friday.

Manufacturing sales figures on Tuesday and wholesale sales figures on Thursday will also garner some attention.

The Loonie ended the week up by 0.67% to C$1.3166 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s also a relatively quiet week ahead.

Key stats are limited to November employment figures due out on Thursday. After a dire set of numbers from October, any further slide in employment levels and expect bets of a February rate cut to rise.

October home loan figures on Monday will draw some attention, with the RBA expecting a pickup in housing sector activity.

From elsewhere, a data dump from China on Monday will set the tone, however…

On the monetary policy front,

Early in the week, the RBA meeting minutes are also due out. The rate statement held back from any talk of a rate cut. The minutes may not, however, which would be Aussie Dollar negative…

There’s also the PBoC in action, with the setting of the loan prime rate scheduled on Friday. The Aussie Dollar got a boost the last time around…

The Aussie Dollar ended the week up by 0.51% to $0.6876.

For the Kiwi Dollar:

It’s a busy week ahead on the economic calendar. Economic data includes consumer and business confidence figures in the 1^st half of the week. The focus will then shift to 3^rd quarter GDP and trade data on Thursday.

We envisage 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 0.50% to $0.6599.

For the Japanese Yen:

It’s another relatively busy week on the economic calendar.

Key stats include prelim December private sector PMIs on Monday, November trade figures due out on Wednesday and inflation figures on Friday.

With inflationary pressure is nowhere to be seen, expect the trade figures to have the greatest influence.

The numbers will further indicate how much of an impact the U.S – China trade war has had on Japan’s terms of trade…

On the monetary policy front, the BoJ is in action on Thursday. Did the upwardly revised GDP numbers give Governor Kuroda more breathing space? Household spending figures suggest otherwise…

Outside of the stats, barring any shock breakdown in final negotiations between the U.S and China, Trump’s impeachment could provide support.

The Japanese Yen ended the week down by 0.74% to ¥109.38 against the U.S Dollar.

Out of China

It’s a relatively busy week on the economic data front. Following disappointing trade figures in the week prior, there will be some sensitivity to the numbers.

November fixed asset investment, industrial production, house price, and retail sales figures are due out.

While we would expect the industrial production figures to have the greatest impact, the rest will need to hold steady at worst.

Outside of the numbers, trade remains the market’s main area of focus. What has China agreed to and will they stick to the terms and can the terms be monitored?

Ultimately, however, it could boil down to whether there is any talk of holding back on a full-blown deal until after the U.S Presidential Election. It may depend on how far China has gone to appease the U.S President.

The Yuan ended the week up by 0.71% to CNY6.9852 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.

Last week, the U.S House committee approved the charges, which could make Trump only the 3^rd president in history to be impeached. A full house vote is expected this coming week. With the Democrats holding 233 seats, the House will likely vote in favor, with only 216 votes needed to impeach.

After that, a trial is expected to commence in January. It could be lengthy if Trump gets his way… In the end, however, 20 Republican Senators would need to break ranks and vote against Trump for an actual conviction.

Trade Wars: Finally a phase 1 agreement. A rollback of tariffs, a commitment by China to purchase agri goods, in substantial quantities, and the cancelation of tariffs due to take effect on 15^th December. Tariffs do remain, however. According to the latest reports, the 25% tariffs on US$250bn worth of Chinese goods remain, while tariffs on $120bn worth of Chinese goods will half from 15% to 7.5%. That leaves the markets reliant on a phase 2 agreement to remove remaining tariffs to support a more upbeat outlook on economic growth…

With Phase 1 done, will Trump look to target the EU next?

UK Politics: Boris Johnson kept hold of the keys to Number 10 in style last week. The markets will now get a sense of what approach he will take in walking Britain out of the EU.

Monetary Policy

BoE: While no surprises are expected, a vote in favor of a rate cut at the last meeting could lead to a 2^nd this time around.

Economic data has been far from impressive, with the private sector contracting in November. With the General Election now out of the way and finally some degree of clarity on what lies ahead, the BoE can begin to prepare the markets for what lies ahead.

In the lead up to the General Election, the BoE had forecasted a short-term pickup in economic activity before a slowdown, suggesting monetary policy easing on the horizon.

BoJ: The Bank of Japan is also in action. 3^rd quarter GDP numbers may have provided some breathing space. The phase 1 trade agreement between the U.S – China will also have helped. Will it be enough though?

Inflation is non-existent and household spending tumbled in October… The tumble was as a result of Typhoons and an October sales tax hike that led to a jump in spending in the prior month.

It remains to be seen, however, whether spending can recover in the wake of the tax hike… This would certainly be a consideration for the BoJ.

This article was originally posted on FX Empire

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