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Inflation data, GDP readings, and Central Bank Speeches Ahead

13 November 2017 by FC Exchange

The week ahead could be full of excitement for the currency market with inflation and growth figures emerging amid central bank speeches and Brexit negotiations, say industry experts FC Exchange.

GBP – Inflation readings ahead

Last week

– The European Commission (EC) slashed UK growth forecasts, suggesting Britain will see 1.5% growth in 2017 down from the previous 1.8% forecast, 1.3% in 2018, and 1.1% in 2019.

– Politics took another unfortunate turn in the UK after Theresa May called back Priti Patel from holiday after she admitted to holding some unauthorised meetings with Israeli officials.

– News outlets reported that Wall Street businesses had discussed Brexit with US Commerce Secretary Wilbur Ross, stating they’d need to move ‘thousands’ of jobs out of the city if no plan from the UK government came forward.

– The National Institute of Economic and Social Research’s (NIESR’s) gross domestic product (GDP) growth estimate came in above expectations at 0.5% in the three months through October. The institution also forecast increases in interest rates by the Bank of England (BoE) to reach 2.0% in 2021.

– EU chief negotiator Michel Barnier set the UK a two-week deadline to offer ‘vital’ clarification on the UK’s financial divorce commitments

– UK trade deficit better than expected at -£2.75 billion in September.

Week ahead

The week ahead could be an exciting one for the pound concerning economic data, with Tuesday seeing the release of the highly-anticipated inflation numbers. The last 3.0% reading saw consumer prices hit a five-and-a-half-year high, and another increase could continue to put pressure on UK households as wage growth fails to keep up with rising prices. In addition, UK labour market data will also emerge this week and could have an influence on the pound’s value. Bank of England Governor Mark Carney is scheduled to make some speeches in the days ahead which could impact sterling further.

EUR – Growth figures in focus

Last week

– The European Commission boosted Eurozone growth forecasts from 1.7% to 2.2% in 2017.

– European Central Bank (ECB) representative Benoit Coeure stated that the currency bloc’s recovery is the strongest in nearly two decades regarding ‘robustness and balance’.

– German factory orders increased from 8.3% to 9.5% on the year in September.

– ECB President Mario Draghi called on banks to cut costs, rather than intimating the ECB’s monetary policy is responsible for weak profitability.

 

Week ahead

Although it’s a relatively quiet start to the week for Eurozone ecotstats, German and Italian growth figures will kick-start the data stream on Tuesday, followed by the ZEW Eurozone surveys and Eurozone growth numbers. Tuesday could get even more interesting with Federal Reserve Chief Janet Yellen, BoE boss Mark Carney and ECB President Mario Draghi all speaking in Frankfurt in the morning. Final Eurozone inflation figures will reach the market on Thursday, and Draghi is due to talk again on Friday.

USD – Dollar falls on tax concerns

Last week

– The University of Michigan’s Sentiment index dropped below forecasts in November, to reside at 97.8, a dip below the previous 100.7 and 100.9 forecast.

– US mortgage applications came in flat in the week through November 3rd, at 0.0%.

– The US dollar came under pressure amid tax reform concerns; the greenback was set for its most substantial weekly decline in four weeks on news that the tax bill may be postponed until 2019.

Week ahead

It’s a quiet start to the week on the US data front, but Wednesday will heat up with US inflation figures and retail sales stats. Consumer prices in the US are forecast to fall on the year from 2.2% to 2.0% in October. Thursday will see the release of some medium-tier data in the form of manufacturing production, housing market data, industrial production, and export price index. Friday will close the week with the moderately influential housing starts, building permits, and the Baker Hughes rig count. Several Federal Reserve members including Janet Yellen are expected to speak this week, which could influence how the US dollar trades.

 

New Zealand dollar – RBNZ adopts more hawkish attitude

The New Zealand Dollar hit a two-week high versus the US Dollar last week (NZD/USD) after the Reserve Bank of New Zealand (RBNZ) held interest rates at 1.75% but took a slightly more hawkish stance on inflation and interest rates. The central bank now sees a rate hike taking place in June 2019 rather than September 2019. The NZD has declined by around 2.3% on a trade-weighted index since the election, causing the Kiwi dollar to sit approximately 6.0% lower than the central bank had predicted against the US Dollar.

 

Canadian Dollar – Oil prices hit the highest level since 2015

The Canadian dollar reached a 12-day high against the US dollar (CAD/USD) last week after oil prices rose to achieve the highest level since July 2015. Bank of Canada (BoC) Governor Stephen Poloz said he was confident that Canadian inflation would return to the 2.0% target as the economy normalises, despite spending a few years below that mark. He stated that ‘the surprising persistence of excess capacity in the economy, and the fact that inflation reacts to excess demand after a lag’ explains the downside miss. Poloz said: ‘The closer we get to full output and employment, the greater the risk that inflation pressures will appear. While the economy is likely to require less monetary stimulus over time, we will be cautious in making future adjustments to our policy rate.’

 

Australian dollar – Central bank downgrades growth expectations

The Aussie sank last week after the Reserve Bank of Australia (RBA) decided to downgrade growth forecasts by 25 percentage points, and forecast inflation would fail to meet its target for four years in a row. The November statement of monetary policy highlighted that the central bank would be less inclined to hike interest rates as a reaction to stronger inflation.

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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