Brexit Divorce Deal, Fed Meeting Minutes, Draghi Speech Ahead
20 November 2017 by News DeskThere's plenty of political and economic events this week that could impact the markets, say currency experts FC Exchange.
GBP – All eyes on the divorce deal
Last week
– Pound bounced to a two-week high against the buck (GBP/USD) at $1.3252 as investors sold off the US dollar.
– David Davis warned EU negotiators to ensure they’re not placing politics before prosperity. On the topic of the divorce bill, Davis said he planned to answer in a few weeks.
– Goldman Sachs Chief Lloyd Blankfein called for a second EU referendum, stating that many CEO’s wanted to confirm the ‘monumental and irreversible’ decision to leave still had support.
– UK inflation came in at 3.0% on the year in October, just shy of the 3.1% forecast.
– Retail sales printed at -0.3% in October on the year, beating the more pessimistic -0.4% expectation.
– Bank of England (BoE) Governor Mark Carney announced that the central bank would ensure it supported the British economy and its banks whether a transition agreement was made or not.
– The UK unemployment rate remained at 4.3%, a 42-year low, while wages came in at 2.2% in September down from 2.3% in the previous month.
Week ahead
Theresa May will be meeting with key ministers on Monday which may see the PM gain an opportunity to heighten her support and be able to make a more appealing offering to the EU. Markets are keen to know if the divorce bill can be settled which would allow talks to turn to trade. Chancellor of the Exchequer Philip Hammond has commented: ‘It’s not about demands; it’s about what is properly due from the UK to the European Union under international law and in accordance with European treaties. We’ve always been clear it won’t be easy to work out that number. But whatever is due, we will pay.’ Hammond will be delivering his latest budget on Wednesday which may also instigate some GBP movement.
Meanwhile, in terms of economic data, the most prominent event this week will be Thursday’s gross domestic product (GDP) release. The third quarter is expected to print at 1.5%, the same as the previous.
EUR – Draghi addresses inflation lethargy
Last week
– German growth came in at 2.8% on the year in the third quarter; analysts had expected 2.3%.
– The Eurozone ZEW economic sentiment survey rose to 30.9 in November, from the previous month’s 26.7.
– Eurozone inflation registered 1.4% growth in October, slightly lower than September’s 1.5%.
– European Central Bank (ECB) President Mario Draghi discussed Eurozone health, stating that low wages were hindering consumer price gains. Draghi said: ‘As the labour market tightens and uncertainty falls, the relationship between slack and wage growth should begin reasserting itself. But we have to remain patient.’
Week ahead
Monday will see European Central Bank President Mario Draghi speak in Brussels which could impact the single currency. Other central bankers are due to talk throughout the week too, and so investors will be paying close attention to their language ahead of the monetary policy meeting minutes on Thursday. There’s a smattering of medium-tier economic data due for release this week including German business climate and current assessment surveys, Eurozone manufacturing and services data, and Eurozone consumer confidence numbers.
USD – Fed meeting minutes ahead
Last week
– The dollar dropped after reports Special Counsel Robert Mueller had ordered a subpoena for Trump’s Presidential campaign and possible Russian collusion.
– US inflation came in at 2.0% on the year in October, falling from 2.2%.
– US retail sales printed at 0.2% in October, better than the 0.0% expectation, but lagging behind the previous 1.9% reading.
Week ahead
Federal Reserve Chair Janet Yellen is scheduled to speak on Tuesday at Stern Business School which may give the US dollar some motive for movement. Meanwhile, another major event this week will be the Federal Open Market Committee’s (FOMC’s) meeting minutes, due for release on Wednesday. The highly influential US durable goods orders number will also make its way onto the market on Wednesday. The week will be tied up with manufacturing and services data on Friday.
AUD – Aussie unemployment drops
– The Australian unemployment rate fell to 5.4% in October, down from 5.5%.
– Australian employment change came in below the 18.8K forecast, at only 3.7K.
– GBP/AUD exchange rate increased as the US dollar sell-off took place.
– This week, Reserve Bank of Australia (RBA) Governor Philip Lowe will be making a speech in Sydney on Tuesday following the release of the central bank’s meeting minutes.
RUB – Ruble registers biggest decline in more than a year
– The Russian Ruble experienced its most significant drop in over a year last week, declining by 2.5% against the euro (RUB/EUR) and 1.5% versus the US dollar (RUB/USD) as oil inventories increased. This time of year can be traditionally a more volatile time for the RUB exchange rate due to external debt payments.
NZD – Kiwi weakens on politics and Chinese demand prospects
– The New Zealand dollar experienced weakness on account of the recent election and the policies the new Labour government could bring in. Policies which may affect the Reserve Bank of New Zealand (RBNZ) could create further NZD volatility.
– Chinese data failed to impress and caused the Kiwi dollar to fall as investors eyed a slowdown in industrial production, which could generate less trade between the nations.
– In the week ahead, New Zealand credit card spending, retail sales, and trade balance data will all come to light.
ZAR – Rand reaches one-year low ahead of rating agency visits
– South African rand hit a one-year low against the US dollar (ZAR/USD) on political concerns and reports that President Jacob Zuma wants to introduce free higher education, which would pressure public finances.
– The resignation of Treasury official Michael Sachs created further instability.
– In the week ahead, South Africa will be visited by some credit rating agencies, and there’s the chance of a downgrade to junk status.
Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.
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