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The Week Ahead – Geopolitics and a Particularly Busy Economic Calendar in Focus

Bob Mason

On the Macro

For the Dollar:

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

It’s a quiet start to the week, however, with September’s Chicago PMI due out on Monday.

Impact on the Dollar will likely be muted ahead of the market’s preferred ISM manufacturing PMI figures on Tuesday.

ADP nonfarm employment change numbers will also provide direction on Wednesday ahead of the ISM non-manufacturing PMI on Thursday.

Factory orders will also garner attention on Thursday ahead of the key data release of the week.

Its nonfarm payrolls on Friday and we can expect both nonfarm payroll and wage growth figures to influence.

As concerns over the U.S and global economies linger, a 2nd month of weak numbers would spur demand for U.S Treasuries.

Of less influence through the week will be finalized Markit survey PMI numbers and trade data.

The Dollar Spot Index ended the week up by 0.66% to $99.109.

For the EUR:

It’s also a particularly busy week ahead on the economic data front.

The EUR will be in action from the start of the week, with German retail sales and employment figures in focus. Barring an unexpected rise, the Eurozone’s unemployment rate will be brushed aside.

We would also expect Spanish inflation and GDP numbers to have a relatively muted impact on the day.

On Tuesday, September manufacturing PMI numbers out of Spain and Italy and Eurozone inflation figures will provide direction. Any downward revision to the Eurozone’s manufacturing PMI will also influence.

Barring deviation, we would expect the markets to brush aside the French and German manufacturing PMI numbers on Tuesday.

With no material stats due out on Wednesday, the focus then shifts to service sector PMI numbers on Thursday.

Barring deviation from prelims, the focus will be on Spain, Italy, and the Eurozone’s numbers. Also of influence on Thursday will be Eurozone retail sales figures, which wraps up the stats for the week.

The EUR/USD ended the week down by 0.70% to $1.0940.

For the Pound:

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

On Monday, key stats include finalized 2nd quarter GDP numbers, which are due out ahead of private sector PMI numbers through the rest of the week.

September’s manufacturing PMI on Tuesday, construction PMI on Wednesday and services PMI on Thursday will be key through the week.

While the UK may avoid a contraction in the 2nd quarter, contraction across the private sector could signal a contraction in the 3rd quarter.

The GBP/USD ended the week down by 1.49% to $1.2292.

For the Loonie:

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

Economic data due out of Canada includes August RMPI numbers on Monday and July GDP numbers on Tuesday.

The markets will then need to wait until Friday for August trade data and September’s Ivey PMI.

After a quiet week on the data front last week, we can expect the Loonie to be sensitive to the numbers.

The Loonie ended the week up by 0.12% to C$1.3247 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a big week ahead.

Through the first half of the week, August private sector credit on Monday and building approvals and September manufacturing data on Tuesday will provide direction.

Trade data on Thursday and retail sales figures on Friday will also garner plenty of attention.

The main event of the week, however, is Tuesday’s RBA interest rate decision. Having held rates unchanged since the summer, a 25 basis point rate cut is expected.

The Aussie Dollar ended the week down by 0.03% to $0.6764.

For the Japanese Yen:

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

Key stats include prelim August industrial production and retail sales figures at the start of the week.

Barring a material slide in industrial production, retail sales will be the market area of focus.

Economic data on Tuesday includes 3rd quarter Tankan index figures.

Through the early part of the week, while the stats will influence, geopolitical risk will continue to be the key driver.

In the week, finalized private sector PMIs will likely be brushed aside, barring material deviation from prelim figures.

With the BoJ signaling further monetary policy easing next month, the numbers would have to be particularly impressive to support any upside.

The Japanese Yen ended the week down by 0.33% to ¥107.92 against the U.S Dollar.

For the Kiwi Dollar:

Stats are on the quieter side in the week ahead.

Key stats are limited to August building consents and September business confidence figures due out on Monday.

On Tuesday, 3rd quarter business confidence figures are also due out.

We would expect the business confidence figures to have the greatest influence on the Kiwi Dollar.

With stats on the quieter side through the 2nd half of the week, the Kiwi will be in the hands of geopolitical risk.

The Kiwi Dollar ended the week up by 0.61% to $0.6296.

Out of China:

It’s a busy start to the week on the economic data front. September private sector PMI numbers are due out on Monday ahead of the week-long holiday.

Expect the numbers to have a material impact on risk sentiment.

The Yuan ended the week down by 0.45% to CNY7.1227 against the Greenback.

Geo-Politics

Iran: There was little chatter on Iran through the week, with Trump’s address at the UN General Assembly doing little to spark fears of military retaliation to the attack on Saudi oil fields. The risk remains, however.

Impeachment: Impeachment talk returned as reports suggested that President Trump attempted to influence the 2020 presidential election race.  Secretary of State Mike Pompeo was subpoenaed last week and expect plenty of action in the week ahead.

Trade Wars: With planned high-level talks rapidly approaching, market sensitivity towards any chatter from Beijing and Washington will continue to drive the majors. Any hint of trade talks being called off and expect risk aversion to kick in. While the Greenback found support from geopolitical risk in the past week, any threat of trade talks being canceled would be negative for the Dollar.

UK Politics: The “never-ending story” of Brexit continues in the week ahead, with Britain left with just 1-month before B-Day.

France and Finland had given the British PM until 30th September to deliver plausible alternatives to the Irish Backstop. With Parliament having returned and Johnson lacking a majority, any deal may be quashed by MPs…

As for Boris Johnson, last week’s Supreme Court ruling all but removed any credibility that the PM had left, following a string of losses in parliament.

The Tory Party Conference this week will certainly garner plenty of attention.

The Rest

The RBA:  On Tuesday, the RBA is expected to cut rates by 25 basis points. Assuming that the RBA delivers, the rate statement will have the greatest influence. Will there be hints of more to come or an end to the easing cycle. Considering the current economic uncertainty, the latter seems unlikely…

This article was originally posted on FX Empire

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