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As investors on both sides of the Atlantic return from an extended weekend, a multitude of foreign exchange drivers – politics, macroeconomics and monetary policy – present themselves during the shortened trading week.
For Sterling traders, the UK general election campaign will continue to remain at the forefront of investor sentiment, with polls released over the bank holiday weekend showing Jeremy Corbyn’s Labour eking out further gains at the expense of Theresa May’s Conservatives.
Last week, the pound fell to its lowest level against the US dollar for 6 weeks and the lowest against the Euro since mid-March as investors began seriously pricing in the probability of a victory for Labour party.
However, the incumbent party remain on average around 9 points ahead of the opposition, which has helped the British currency manufacture a gentle recovery from Friday’s lows against its European and US peers. With just over a week until voters head out to cast their votes, is it too little, too late for Labour?
The euro started the week on the back foot courtesy of dovish commentary from ECB chief Mario Draghi. He maintained that it was necessary for controversial policies such as Quantitative Easing to remain in place, despite German complaints, in order to help remove underlying inflation from its current ‘subdued’ state.
However, only a day later, sources from within the central bank have claimed that policymakers may discuss the removal of some easing policy at the Governing Council meeting next week, directly at odds with Draghi’s supportive remarks to lawmakers in Brussels. Having now raised possible divergence between internal and external views from the ECB, euro traders will be listening to policymaker speeches throughout the week with more care than ever.
This week also sees the most eagerly anticipated US macroeconomic data release of the month: the US Jobs Report. The highly anticipated release – which includes headline Unemployment, Average Weekly Earnings and the all-important Non-Farm Payrolls figure – comes just two weeks before the Fed meet to discuss a possible rate hike. The metric is regularly seen as the final hurdle for monetary policy ahead of the policymakers’ meeting, making it an unparalleled influence on the US dollar.
Fed Fund Futures are once again forecasting 100% probability that the FOMC will hike interest rates for the second time in 2017 in just over a fortnight’s time. Will the Non-Farm Payrolls print throw some uncertainty into the mix or will it only serve to act as a procession for the 3rd rate hike since December?
Other key macroeconomic data releases include Eurozone Consumer Price Inflation and Unemployment (Wednesday; 10am) for a measure of just how well the ECB’s policy is serving its dual-economic objectives, economic strength barometer for the UK economy Manufacturing PMI (Thursday; 9:30am) and curtain raiser for the US Jobs report ADP Employment Change (Thursday; 1:15pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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Intl Economic Announcements
00:30 Unemployment, Retail Sales (JP)
07:45 GDP (FR)
10:00 Confidence Indicators (EZ)
13:00 CPI (DE)
13:30 Personal Income & Spending (US)
14:00 S&P House Price Index (US)
15:00 Consumer Confidence (US)
15:30 Dallas Fed Manufacturing Index (US)
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UK Economic Announcements
00:05 Gfk Consumer Confidence, Lloyds Business Barometer
09:30 Mortgage Approvals
Intl Economic Announcements
00:50 Industrial Production (JP)
02:00 Manufacturing & Non-Manufacturing PMI (CN)
07:00 Retail Sales (DE)
07:45 CPI (FR)
08:55 Unemployment (DE)
10:00 CPI, Unemployment (EZ)
12:00 MBA Mortgage Applications (US)
14:45 Chicago PMI (US)
15:00 Pending Home Sales (US)
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UK Economic Announcements
09:30 Manufacturing PMI
Intl Economic Announcements
01:30 Manufacturing PMI (JP)
02:45 Caixin Manufacturing PMI (CN)
8-9am Manufacturing PMI (European; various)
12:30 Challenger Job Cuts (US)
13:15 ADP Employment Change (US)
13:30 Weekly Jobless Claims (US)
14:45 Markit Manufacturing PMI (US)
15:00 ISM Manufacturing PMI, Construction Spending (US)
15:30 Oil Inventories (US)
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UK Economic Announcements
09:30 Construction PMI
Intl Economic Announcements
06:00 Consumer Confidence (JP)
10:00 PPI (EZ)
13:30 Jobs Report, Trade Balance (US)
14:45 ISM New York (US)
18:00 Baker Hughes Rig Count (US)
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