Politics take the spotlight as Brexit deal and transition period in question
Monday’s a relatively quiet day for significant data. Overnight, the UK Rightmove House Prices figure showed a contraction of -0.2% in November on the year, a decline in comparison to the previous +0.9% reading. The US will release its NAHB Housing Market Index later in the session, but for the most part, all eyes will be on political developments, namely Brexit.
Last week, market volatility ramped up when UK Ministers began to resign over Theresa May’s Brexit deal, and the Prime Minister faced calls to resign once again. EU negotiator Michel Barnier has suggested the UK could extend its transition until the end of 2022, and markets are closely watching any developments this week to determine the Pound’s worth. Theresa May and Jeremy Corbyn will both be speaking at the Confederation of British Industry (CBI) conference in today’s session. It’s expected CBI President John Allan will endorse Theresa May’s draft deal, while also highlighting how much Brexit is damaging the UK.
The Pound might feel some influence from the Bank of England (BoE) on Tuesday when Governor Mark Carney and other policymakers testify in London. Carney’s comments on interest rates and Brexit will be closely followed and could give the GBP exchange rate some opportunity to move. Meanwhile, US Housing Starts and Building Permits stats will also be out.
For investors interested in the Australian Dollar, the Reserve Bank of Australia (RBA) will publish its November 6th meeting minutes, and Governor Philip Lowe will also give a speech. The Westpac Leading Index will print as well.
Things could heat up on Wednesday when both Istat and the Organisation of Economic Co-operation and Development (OECD) release economic forecasts. Also, UK public finances and borrowing numbers will be revealed. Across the pond, US Durable Goods Orders and the October Leading Index will reach markets, alongside weekly mortgage applications and jobless claims stats.
Japanese data will also be in focus on Wednesday, with the release of the latest inflation number and the All Industry Activity Index. Inflation is forecast to increase from 1.2% to 1.4% on the year in October, which could increase the safe-haven Yen’s appeal.
Central bank developments will be in focus once again on Thursday when the European Central Bank (ECB) publishes its October 25th monetary policy meeting minutes. Investors will be looking for signals the central bank still plans to wrap up its hefty sovereign bond-buying programme, following a raft of weaker economic data. Eurozone Consumer Confidence data will also be out, and economists expect the ecostat to contract further in November at -3.0 after October’s -2.7.
Australian data will be back in focus on Thursday when the latest manufacturing, services, and composite numbers print.
A selection of German and Eurozone data will make their way onto the market on Friday, including the final third quarter German Gross Domestic Product (GDP) stats. Also published will be the German, Eurozone, and US Manufacturing, Services, and Composite Purchasing Managers’ Indexes (PMI). Additionally, one political development to watch in the week ahead will be the latest developments between Italy and the European Council over the budget.
Investors in the Canadian Dollar will want to pay close attention to the Retail Sales and Consumer Price Index (CPI) ecostats on Friday. Retail Sales are expected to fall flat at 0.0% in September, while inflation is forecast to hold steady at 2.2%. Meanwhile, Japan’s November Manufacturing PMI will also be revealed in the early hours.