The Week Ahead – Brexit, Earnings, Monetary Policy and Stats Are in Focus
Bob Mason
On the Macro
It’s another busy week ahead on the economic calendar, with 58 stats to monitor. In the previous week, 47 stats had been in focus.
For the Dollar:
It’s a particularly busy week ahead on the economic calendar.
On Tuesday, December durable goods orders and January consumer confidence figures will provide direction. Expect consumer confidence numbers to have the greatest influence on the day.
The focus will then shift to 4th quarter GDP numbers due out on Thursday. Expect plenty of market sensitivity to the numbers. Forecasts are for the economy to grow at the same pace as in the third quarter.
On Friday, the FED’s preferred Core PCE Price Index figures are due out along with personal spending and employment cost numbers.
New home sales figures for December will also influence on Monday while pending home sales and trade data will likely be brushed aside on Wednesday.
On the monetary policy front, the FED is in action on Wednesday… While expectations are for the FED to stand pat, forward guidance will influence. A more hawkish FED could rattle the global equity markets.
Outside of the numbers, while Trump’s impeachment trial will draw attention, a continued threat of tariffs on the EU will also influence.
We can also expect updates on the spread of the coronavirus to also dictate demand for U.S Treasuries.
The Dollar Spot Index ended the week up by 0.25% to 97.853.
For the EUR:
It’s a relatively busy week ahead on the economic data front.
Germany’s IFO Business Climate Index figures are due out on Monday ahead of February consumer climate figures that are due out of Germany on Wednesday.
We can expect the numbers to have a material impact on the EUR early on. Consumer spending is key for Eurozone growth, making the EUR all the more sensitive to confidence figures.
The focus will then shift to the German and Eurozone unemployment numbers on Thursday.
At the end of the week, 4th quarter GDP figures out of France, Spain and the Eurozone and French and German consumer spending figures will also garner plenty of attention.
Barring a material pickup in inflationary pressure, we would expect prelim inflation figures to have a muted impact in the week.
Outside of the numbers, geopolitical risk will continue to influence as the markets look towards chatter on Brexit, possible EU tariffs and news from the impeachment trial.
It’s worth noting that a continued spread of the coronavirus would be EUR negative.
The EUR/USD ended the week down by 0.60% to $1.1025.
For the Pound:
It’s a particularly quiet week ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.
On the monetary policy front, the BoE is in action on Thursday.
Following a string of weak stats in recent weeks, expectations are for the BoE to hold. Positive numbers out of the UK last week shifted sentiment on monetary policy.
BoE Governor Carney is due to speak after the decision, which will garner plenty of interest. Expect the vote count to also influence…
On the geopolitical risk front, it’s Britain’s final week as a member of the EU. Late last week we continued to hear from the Establishment. The Dutch Prime Minister stated how unlikely it would be for a trade agreement between the Netherlands and the UK near-term.
The GBP/USD ended the week up by 0.44% to $1.3073.
For the Loonie:
It’s a particularly quiet week ahead on the economic calendar.
The markets will need to wait until Friday for November GDP and December RMPI figures. Following last week’s dovish comments from BoC Governor Poloz, expect plenty of sensitivity to the numbers.
With no material stats due out earlier in the week, expect risk sentiment to provide direction in the week.
Positive sentiment towards trade is Loonie positive, though economic data from elsewhere will also play a hand as 4th quarter GDP numbers start rolling out.
The Loonie ended the week down by 0.59% to C$1.3143 against the U.S Dollar.
Out of Asia
For the Aussie Dollar:
It’s a relatively busy week ahead.
Key stats include business confidence numbers due out on Tuesday and 4th quarter inflation figures due out on Wednesday.
We can also expect wholesale inflation figures for the 4th quarter to also influence on Friday.
With sentiment towards monetary policy turning more dovish, December private sector credit numbers will also garner interest on Friday.
The numbers could reflect the impact of the bush fires on demand for credit at the end of the year. Weak numbers would support those expecting the RBA to make a move next month.
The Aussie Dollar ended the week down by 0.68% to $0.6832.
For the Kiwi Dollar:
It’s another quiet week ahead, with key stats limited to December trade data due out on Thursday.
Weak numbers would test the Kiwi as the markets expect monetary policy to be on hold through the year ahead.
The Kiwi Dollar ended the week down by 0.12% to $0.6607.
For the Japanese Yen:
It’s a relatively busy week on the economic calendar. The markets will have to wait until the end of the week, however, for the numbers.
Key stats include January inflation figures, December retail sales numbers, and prelim December industrial production figures.
Expect the retail sales and industrial production figures to have the greatest influence on the day.
While the numbers will provide direction, risk sentiment will continue to be the key driver for the Yen.
On the geopolitical risk front, talk of U.S tariffs on EU autos would fuel demand for the Yen. There’s also the spread of the coronavirus to consider.
The Japanese Yen ended the week up by 0.78% to ¥109.28 against the U.S Dollar.
Out of China
It’s a quiet week on the economic data front. The markets are closed through to Thursday for the Chinese New Year.
On Friday, however, the NBS private sector PMI numbers for January will influence. The markets will be looking for continuous expansion across the private sector at the turn of the year.
The Yuan ended the week down by 0.74% to CNY6.9109 against the Greenback.
Geo-Politics
Impeachment: Trump’s impeachment trial continues. The Democrats’ prosecution ended last Friday, with Trump’s defense expected to last 3-days. There’s been little influence on the global financial markets, however. Republicans have yet to jump ship, which should leave Trump in the Oval Office until November at least… A Republican-controlled Senate would need a two-thirds majority to oust the President.
Trade Wars: The chances of an EU – U.S trade war rose late last week as both sides laid down their threats. While both sides will be keen to reach an agreement, Trump is more than capable of hitting the EU ahead of any talks…
UK Politics: Its Britain’s final week as a member of the EU. Expect the Establishment to talk about the difficulties in putting a trade agreement in place before the end of the transition period. How Boris and team progress in trade talks beyond the borders of the EU will be key near term.
Iran and the Middle East: There’s been no major news or escalation since the attacks at the start of the year. Tension continues to simmer, however and requires continuous monitoring.
Corporate Earnings
It’s a busy week ahead on the corporate earnings calendar.
From the U.S: Amex (Mon), Amazon.com (Thurs), Apple Inc. (Tue), Boeing (Wed), Exxon Mob. (Fri), Facebook Inc. (Wed), (Netflix (Tue), Lockheed Martin (Thurs), Microsoft (Thurs), Pfizer Inc., (Tue) are amongst the big names scheduled to release in the week ahead.
Out of Germany: Deutsche Bank (Thurs) and Siemens (Wed) earnings results are in focus.
From the UK: BT Group (Thurs), Diageo PLC (Thurs), and Unilever (Thurs) are also scheduled to release earnings results.
