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As earnings season draws to a conclusion for another quarter, the focus for foreign exchange traders will be firmly set on geopolitics and central banks as a raft of potential market bombshells are prepared this week.
Things get off to a flying start as we expect the first indictments from former FBI chief Robert Mueller’s special investigation into Russian collusion in the Presidential election. Whilst the charges and the charged remain unknown, the proximity of the people that the charges are bought against to President Trump will likely provide an indication of how markets are likely to react.
A member of Trump’s inner circle and/or campaign team could see the recent dollar rally from 33-month lows stall, however a person unaffiliated with the administration could pave the way for the greenback to move to fresh 3-month highs.
The start of indictments from the Mueller investigation comes at an important time for President Trump, with the former reality show star revealing his pick for the next head of the Federal Reserve in typically grandiose fashion. With reported that the field of potential candidates has been whittled down to two – Fed Governor Jerome ‘Jay’ Powell and Stanford academic John Taylor – the President has promised to reveal his nomination before leaving on a tour of Asia on Friday, with some outlets suggesting that Thursday will be the day of his ‘grand reveal’.
Powell, as the candidate with experience working within the Fed, is likely to be the market-favoured candidate, although Taylor’s perceived hawkishness may prove attractive to US dollar traders.
Sticking with the Fed theme, markets are hoping Wednesday’s meeting and policy update (expected at 6pm) will provide further clarity on 2018 monetary policy projections as well as indicating whether a third consecutive December rate hike will be in the offing.
However, the central bank spotlight this week will instead fall upon the Bank of England, as the British central bank is expected to raise interest rates for the first time in a decade on its ‘Super Thursday’. BoE governor Carney has been extremely vocal in broadcasting a rate hike before the end of 2017, with bond markets suggesting an 87% probability of an increase.
Despite being a notable turning point in the Bank’s monetary policy, it is unlikely to signal the start of a Federal Reserve-esque series of interest rate hikes. Instead, this will likely only be a reversal of the post-Brexit rate hike in order to ease some of the inflationary pressures currently facing UK consumers.
As a result, Sterling may only see a marginal impact as the effects of a rate hike are largely priced in, however there may be some room for a significant reaction should the BoE either choose to keep rates steady or raise it by more than 0.25%.
Finally, delving back into politics, the latest episode in the ongoing Catalonian independence attempt will continue to drive sentiment for the Euro, as the economic area’s single currency falls to a 3-month lows against the dollar. Attempts by the regional government to declare independence from Spain have been unsuccessful, with last Friday’s vote to secede being met with threats of up to 30 years in prison for the Catalan President Puigdemont.
Macroeconomic data of note this week includes Eurozone GDP, Inflation and Unemployment (Tuesday; 10am), US Consumer Confidence (Tues; 2pm), UK & US Manufacturing PMI (Wednesday; 9:30am/1:45pm), UK Services PMI (Friday; 9:30am), and US Non-Farm Payrolls, Unemployment and Average Earnings data (Fri; 12:30pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
00:01 GfK Consumer Confidence & Lloyds Business Barometer
Intl Economic Announcements
01:00 Manufacturing & Non-Manufacturing PMI (China)
02:00 BoJ Monetary Policy Update (Japan)
06:30 Q3 GDP (France)
07:45 CPI (France)
10:00 CPI, GDP & Unemployment (Eurozone)
12:30 Employment Cost Index (US)
13:00 S&P/Case-Shiller House Price Index (USA)
13:45 Chicago PMI (USA)
14:00 Consumer Confidence (USA)
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UK Economic Announcements
00:01 BRC Shop Price Index
09:30 Manufacturing PMI
Intl Economic Announcements
01:45 Caixin Manufacturing PMI (China)
12:15 ADP Employment Change (USA)
13:45 Manufacturing PMI (USA)
14:00 ISM Manufacturing & Construction Spending (USA)
14:30 Oil Inventories (USA)
18:00 FOMC Monetary Policy Update (USA)
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UK Economic Announcements
09:30 Construction PMI
12:00 BoE Monetary Policy Update
Intl Economic Announcements
05:00 Consumer Confidence (Japan)
08:45 Manufacturing PMI (Italy)
08:50 Manufacturing PMI (France)
08:55 Manufacturing PMI (Germany)
09:00 Manufacturing PMI (Eurozone)
11:30 Challenger Job Cuts (USA)
12:30 Non-Farm Productivity (USA)
13:45 ISM New York (USA)
UK Economic Announcements
09:30 Services PMI
Intl Economic Announcements
01:45 Caixin Services PMI (China)
12:30 Non-Farm Payrolls, Average Earnings & Unemployment (USA)
14:00 Durable Goods (USA)
14:45 Services PMI (USA)
17:00 Baker Hughes Rig Count (USA)
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