Oct 9, 2016 - Weekly Macro W41

After Francoise Hollande’s comments on hard Brexit, the pound dropped sharply in early Asian trading on Thursday without any further explanation. The latest US data helped to boost expectations that December rate hike is still on the table. The New Zealand Dairy price index fell 3% that put additional weight on the Kiwi. Similarly the decline of Crude inventories caused a rally in oil prices and oil currencies.

The coming week seems to be very light in terms of economic data that is maybe not that bad as the market may calm down after last week’s GBP moves. The US elections are getting more and more attention as we are getting closer to November 8^th but there are no implications on FX markets yet... at least nothing visible. Definitely there is a hard week ahead of Mr. Trump after the released recordings…

Monday:

It’ll be Columbus Day in the US and therefore in FX expect subdued liquidity from late afternoon. We will start the day with Germany’s trade balance which dropped surprisingly the last two readings and analysts expect to hold at the 2016 lows below 20B Euros. The next data will be the retails sales of members the British Retail Consortium. It could be a leading indicator to the UK Retail Sales published on the 20^th October. Both of them are notoriously volatile, but GBP now needs any positive news to regain some stability. The day will end with Japanese Current Account which is in massive surplus since mid-2015. The market was surprised by the 0.2T drop last month but analyst are expecting light rebound this time.

Tuesday:

The monthly change in Home loans for owners will start the day from Australia. The overheated housing market is one of the major problems of the country and this is an excellent leading indicator of the demand side of the market. We saw a relatively big drop last month and if this will continue it can add to the pressure on AUD. The same time the NABs business confidence will be released too which was relatively stable the last 12 months between 2-6 points. The German ZEW Sentiment Index couldn’t bounce yet after the surprise drop below 0 level in July due to fears the Brexit vote will negatively influence. Similar pattern we could spot in the Eurozone survey too. In the afternoon only lightweight data from Canada and US will be released.

Wednesday:

Only less important data is expected during Asian session and European morning. In the afternoon we start with the speech of NY Feds Dudley, who is a rather dovish FOMC voting member. After the speech we have JOLTS Job Openings which is with other words the demand side of the job market. It is rather a complex report worth to read. FOMC meeting minutes will be released where analysts and algos thirsty for any hint regarding rate hike will search for any detail of the meeting supporting the case. Don’t forget in the evening the API Weekly Oil Stock Report which is moved from Tuesday to Wednesday, and could be a market mover especially in CAD and NOK crosses. The drop in oil stock was significant last week and definitely a rebound is expected but hard to say by how much yet.

Thursday:

The Chinese Trade Balance was expected to rise by more than 8%, instead it has risen only 1%. Chinese trade data are leading indicator to global growth and therefore closely watched by traders and economist. Now a more than 5% increase is projected which could be surpassed as in September all the factories are at almost full speed to fulfil the typically increased demand before Christmas. The data of the afternoon are the change in number of US Unemployed which is steadily declining, and the US Import Prices, the first government data and a leading indicator to inflation so we can get a hint what to expect from PPI on Friday. Both the jobless claims and the import prices are forecasted to increase slightly but no big jump is expected. The EIA Crude Oil Inventories will be released as the last possible market mover of the day. As this Oil report is more complex, we can see more intense reactions (watch CAD and NOK) especially if the inventories will rise more than expected.

Friday:

The less data we had the first half of the week the busier schedule is for the last working day. Overnight the Reserve bank of Australia’s Financial Stability Review followed by the Chinese inflation data (CPI and PPI) will start the flow of events. In the morning the results of the BoE Credit Conditions Survey will be released which is an app 12 page document and could be read as a confidence indicator. The more debt the more confident the economic participants are. At current GBP levels this will be surely a closely watched report, where we will try to get a picture how the Britons feel amid the pre-Brexit chaos. In the afternoon plenty of US data will be released at the same time with the speech of FOMC dove Eric Rosenberg, so the effect could be significant. The Core Retail Sales (Retail sales ex-automobiles) has usually a strong October except the last 2 years when it brought a negative surprise. We also have the second inflation indicator of the month the US PPI and Core PPI. I the producers’ prices are increasing then usually it is converted into the Consumers prices so watch this for hints what can you expect from the next weeks CPIs. And the last market mover data set could be the figures from the University of Michigan Consumer Survey in the late afternoon followed by Mrs. Yellen’s speech a few hours later.

Next week the US Money Market Reform will come into force. Please read our report on the Reform and its implications here: US Money Market Reform 

Remember to watch your risk and be consistent

Mr. Tech Man

DISCLAIMER: This material was created for informational purposes only and represents the Land of Trading team’s view of the past and current economic and capital market environment. It is not an investment advice and should not be viewed that way at all, and the creators of this material cannot be held liable for any potential losses resulting from trading, where despite this disclaimer someone would consider this material as an investment advice. All rights reserved ©2016. 

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