Brexit breakthroughs and US midterms in focus
The most important piece of data on Monday will be the US ISM Non-Manufacturing/Services Composite Index. Economists are expecting a decline from 61.6 in September to 59.5 in October, but given the strong September reading, a slight fall shouldn’t have too much impact on the Greenback. The UK also releases services data on Monday. The Markit UK Services and UK Composite Purchasing Managers’ Indexes (PMI) both posted declines; investors will be particularly interested in the services fall as the sector accounts for such a large part of the British economy. Bank of Japan (BoJ) Governor Haruhiko Kuroda will speak in Nagoya, and Bank of Canada (BoC) Governor Stephen Poloz will speak in London.
Politics are likely to steal the show on Tuesday with the UK cabinet meeting taking place which could reveal a Brexit breakthrough. Two weeks of strategic silence might yield a result in the EU/UK deadlock, which could be very positive for the Pound exchange rate. Another exciting development for markets on Tuesday will be the US midterm elections which will be significant for the future of Trump’s Presidency. A Democrat majority would mean Republican measures could be blocked. If Democrats were able to gain control of the House, it would enable them to potentially launch impeachment proceedings against Trump.
For the Pound, Euro, and US Dollar, there’s little data out which will significantly impact their movement, with mainly low-tier releases due to be published. However, the Eurozone will release a raft of ecostats in the form of Italian, German, French, and Eurozone PMI’s, which will display the final October figures. Any deviation from the original readings could put some pressure on the EUR exchange rate. German Factory Orders numbers for September will also reach markets; the August print registered a -2.1% contraction on the year and September is expected to show a further slip to -2.8%. It’s a quiet day for UK and US economic data, with only the British Retail Consortium’s (BRC) Sales Like-for-Like data out in the UK. Volatility in the Australian Dollar could occur ahead of the Reserve Bank of Australia’s (RBA) cash rate decision, while the New Zealand Dollar remains reactive to the latest labour market stats.
Eurozone data will be at the front of investors’ minds on Wednesday with German Industrial Production, the German Construction PMI, and Eurozone Retail Sales numbers all making their way onto the market. The US will also shed some light on Consumer Credit, and Mortgage Applications for the week through November 2nd, while UK Halifax House Price data is also revealed.
In central bank developments, the Reserve Bank of New Zealand (RBNZ) will be setting its cash rate target, followed by Governor Adrian Orr’s appearance at the parliament select committee. Meanwhile, the latest Japanese Leading and Coincident Indexes will be out, and the BoJ’s Yukitoshu Funo will speak.
Market movement is expected to heat up on Thursday when the US Federal Reserve makes its latest interest rate decision. Economists expect the central bank to keep rates on hold at the November meeting, but investors will be watching to see whether the central bank has a more hawkish stance moving forwards after recent economic data. Friday’s Change in Non-Farm Payrolls figure showed an impressive rebound in October, while wage growth amassed its biggest gain in nine-and-a-half years.
In other economic data, the latest Swiss Unemployment Rate figure will print, with forecasts suggesting it will stagnate in October at a seasonally adjusted 2.5% (n.s.a stands at 2.4%). The Canadian Housing Starts and Housing Price Index will also be released.
UK growth numbers will be at the forefront of Friday’s data stream for GBP investors, with the third quarter figure predicted to rise to 1.5% on the year after the previous 1.2% reading. Investors will be keen to see the ongoing effect of Brexit on the British economy, and so Sterling could experience some significant movement on the growth figure. A raft of other UK data will also be out, including Trade Balance, Industrial Production, Manufacturing Production, and Construction Output. US sentiment data will also print.
For those interested in the Australian Dollar, the RBA will be making a statement on monetary policy which could be significant for the Aussie currency. Meanwhile, China will release its October Consumer Price Index which could influence not only the Yuan but also the Trans-Tasman currencies as the nations’ share strong trade links.