The Chinese trade data had the most impact on the markets last week. The 10% decline in exports caused a bear run on equities which was however stopped quickly by the better than expected Chinese inflation data
the next day. The coming week is full of events, most notable BOC and ECB
rate decisions, the CPI and housing data from US as well as the Chinese GDP.
But let’s stop for a moment at the US data from the last week as the markets
attention is more and more focused on the December rate decision. The
probability of a December rate hike is around 67% according to different polls
(BB, Reuters etc.) and the fact that only 2 out of 8 data released last week
were worse than expected, seems to support this case.
One of the
key factor the Fed is following regarding their comments on the possible rate hike is Consumer Inflation
(measured by Core PCE Price index). Last week there were released two leading
inflation indicators which can help us to predict how long we will have to wait
for increase of the price levels in the US. Both the Core PPI and Core retail
Sales came out much better than expected and this fuelled the positive
expectation regarding the December hike and caused the EURUSD has broken the
significant 1.10 level on Friday. Next week we have the consumer price index,
which could be a market mover again.
The Event
Risk Calendar for next week you can find in the table at the bottom of page.
Below I wrote notes to some of the events for each day.
Monday
We will
start the day with Final CPI numbers
from the Eurozone with no impact expected
providing the release will confirm there is no change in the inflation. A more
important data the US Capacity
Utilisation Rate will be release in the afternoon. Stanley Fisher 6-7 weeks
ago expressed concerns about this indicator and the Fed can’t do anything about
it, it’s on the private sector this time and it’s still far from the potential
of the economy. Is it good because there is still enough capacity to mobilise
or it’s bad because there is not enough demand….? For sure it`s well below the 77.8%
utilisation rate in June 2004 when the Fed started its rate hike cycle under
Greenspan. New Zealand will release Consumer inflation data at the end of
the US session. The CPI fell from 1.6% in 2014 to just 0.1% at the end of last
year. In the first 2 quarters 2016 it held at 0.4% but the RBNZ would like to
see this figure above at least 1%. Well, analysts are forecasting another drop
to 0-0.1%, so probably more trouble ahead for RBNZ raising the question when
the next rate cut will come. The is at key levels and on Friday bounced
in front of the uptrend-line so watch this data.
Tuesday
It will be
inflation day. At the beginning of the European session we have UK inflation and the market is
expecting a modest increase for September. The headline CPI is expected to rise to 0.9% from 0.6% and also a rise is
expected in PPI for input and output.
The main problem of the country is however not the inflation but rather the
Current account which is close to record deficits. In the afternoon we have CPI from US. While the monthly headline
data is expected to increase, the monthly core
CPI is expected to decline. The last price index is coming from New Zealand, the Global Dairy Trade price index is a key index for the country due
to the strong Dairy industry. The last month the index dropped below 0 for the
first time in 5 weeks.
Wednesday
Strong
start to the day is expected from China as the GDP (exp. 6.7%) and Industrial
production (exp. 6.4%) will be released. Do you remember how much impact the
Chinese Trade balance and inflation had…? So watch this data and be prepared
that in case of any surprise the market will respond rapidly. The UK employment
figures will be out at the beginning of the European session, no improvement is
expected in the economy close to full employment. The cable was sold heavily
last week and many consider these levels as very oversold so be prepared for a
bounce if big positive surprise. We will have a break until early afternoon
when US Building Permits and Housing starts will be released, both surprised to
the downside. Building Permits are in a downtrend and Housing starts are stuck
between 1.04 and 1.21 mil for the last one and a half year. The current max
levels are however still far below the numbers of the years of the last rate hike cycle. The Bank of Canada
rate decision is the next big event, even no change is expected the
monetary statement could give us some cluse what to expect from the future.
Thursday
The
Australian employment figures are out shortly after midnight and market expect
a modest rise of unemployment rate but a rise in employment on the other hand.
In the European morning the UK retail sales will be released. The last week the
BRC Retail Sales Monitor showed a slight improvement in retail sales but the
official numbers are not expected to change compared to August figures. The big
event of the day is the ECB rate decision. Of course not too many analysts
expect rate cut, but we are wondering if the heads of European central banks will
use their creativity like the Japanese did with changing the focus and the
tools of monetary policy. The same time as Mr. Draghi will start to speak the
US Jobless claims will be released along with the regional Manufacturing index
of the Philly Fed but most probably will have muted effect due to ECB. At the
end of a busy day we will get Existing home sales from the US which has
unusually declined in September.
Friday
This will
be the second day of EU economic summit. The calendar is pretty empty for this
day except Canada, where the CPI numbers will be released with Retails sales. In
both cases the market is optimistic and analyst expect big gains.
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.
Contact: landoftradingATgmailDOTcom, Blog:
landoftrading.blogspot.com
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