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As if 2017 hadn’t already faced enough election battles, Ireland is shaping up to be the next European country to face a run-off between party leaders. An ongoing scandal engulfing the Deputy Prime Minister, or Tánaiste, threatens the prospect of the opposition calling for fresh elections. As the Northern Irish border becomes the focal point of stalling Brexit negotiations, could another surprise election put yet another spanner into the UK-EU talks?
This comes as the German government remains in limbo as Chancellor Angela Merkel and her CDU/CSU party attempt to form another grand coalition with the election’s second placed SPD. Merkel, having won the most votes in September’s election, has the backing of the German President to form a coalition government in order to quash the prospect of fresh elections. However, crucial talks with FDP and Green parties broke down last weekend, with all three parties now ruling out the prospect of a so-called ‘Jamaica’ coalition. A grand coalition now seems to be the only option available to Merkel to stave off a 2018 election, having previously announced that she will not look to lead a minority government. The current Chancellor meets Martin Schulz, the head of the SPD, to discuss a possible coalition on Thursday.
Any extended period of uncertainty over the future of the Eurozone’s largest economy, and the potential for an Irish election to further stall Brexit negotiations, could see the Euro’s November rally face yet more hurdles.
With that said, however, the US dollar is not faring much better than its European counterpart. The global reserve currency has started the week by falling to a fresh 2-month lows as investors digest political drivers, including the ongoing Mueller investigation into Russian hacking of last year’s election and proposed Republican tax reform plans, as well as concerns that the Federal Reserve will be more hesitant in raising interest rates over the course of 2018 under new leadership.
On the theme of the FOMC, this week sees both the incoming and outgoing Fed Chairs appearing before committees in Washington over consecutive days.
On Tuesday, current Fed Governor and President Trump’s nominee to take over the top job Jay Powell will face a grilling from the Senate Banking Committee over his suitability for the role. Investors will be keenly watching Powell’s performance for any clues as to how US monetary policy will progress under his leadership.
A day later, his soon-to-be ex-boss Janet Yellen faces Congress’ Joint Economic Committee to discuss how she leaves the world’s largest central bank. Comparing the two performances will paint a much better picture of 2018 interest rate changes, with special attention being paid to whether Powell, seen as a more hawkish policymaker than his predecessor, will diverge from Yellen’s policy of gradual and sustained rate hikes to the benefit of the embattled dollar.
Data-wise, US Q3 GDP (Wednesday; 1:30pm) is expected to be revised higher, while the Fed’s preferred inflation gauge, the PCE Price Index, is expected at 1.3%, still a way below the central bank’s 2% target.
Finally, the UK’s Pound Sterling, whilst lacking the major drivers that its peers will endure this week, will remain susceptible to Brexit soundbites throughout the week.
Having fallen to a one and a half week low against its European counterpart in this week’s early trading, the currency pairing will continue to reflect the state of relations between the UK and EU, with any compromise made by either side to move talks forward likely to benefit Sterling.
However, with uncertainty in Ireland not helping the border conundrum faced by Westminster, and hard-line Brexiteers still unwilling to budge on a Brexit divorce settlement, this still looks as though it will take some concession from Brussels in order to make it happen.
Other major data of note this week includes US Consumer Confidence (Tuesday; 3pm), UK Mortgage Approvals (Wednesday, 1:30pm), US Fed Beige Book (7pm), Eurozone Inflation and Unemployment (Thursday; 10am), US Personal Income, Spending and PCE Price Index (1:30pm), global Manufacturing PMI prints (Friday) and US ISM Manufacturing & Construction Spending (Friday, 3pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
07:00 Nationwide Housing Prices
07:00 BoE Financial Stability Report
Intl Economic Announcements
10:00 OECD Economic Outlook
13:30 Wholesale Inventories (USA)
14:00 House Price Index (USA)
15:00 Consumer Confidence (USA)
15:00 Richmond Fed Manufacturing Index (USA)
15:00 Senate Banking Committee Hearing for Fed Chair Nominee Powell (USA)
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UK Economic Announcements
00:01 BRC Shop Price Index
09:30 Mortgage Approvals
Intl Economic Announcements
07:45 Q3 GDP (France)
10:00 Confidence Indicators (Eurozone)
13:00 Inflation (Germany)
13:30 Q3 GDP & PCE Prices (USA)
15:00 Pending Home Sales (USA)
15:00 Fed Chair Yellen appears before Congress (USA)
15:30 Oil Inventories (USA)
19:00 Fed Beige Book (USA)
23:50 Industrial Production (Japan)
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UK Economic Announcements
00:01 GfK Consumer Confidence & Lloyds Business Barometer
Intl Economic Announcements
All Day OPEC/non-OPEC Meeting in Vienna
01:00 Manufacturing & Non-Manufacturing PMI (China)
07:00 Retail Sales (Germany)
07:45 Inflation (France)
08:55 Unemployment (Germany)
10:00 Inflation Estimate & Unemployment (Eurozone)
13:30 Personal Income & Spending, PCE Price Index (USA)
14:45 Chicago PMI (USA)
23:30 Inflation & Unemployment (Japan)
UK Economic Announcements
09:30 Manufacturing PMI
Intl Economic Announcements
00:30 Manufacturing PMI (Japan)
01:45 Caixin Manufacturing PMI (China)
08:45 Manufacturing PMI (Italy)
08:50 Manufacturing PMI (France)
08:55 Manufacturing PMI (Germany)
09:00 Manufacturing PMI (Eurozone)
14:45 Manufacturing PMI (USA)
15:00 ISM Manufacturing & Construction Spending (USA)
18:00 Baker Hughes Rig Count (USA)
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