On Friday, the focus continued to be on Deutsche Bank, and the speculation around how much trouble they are in. There was also much focus on whether any rescue plan may be necessary, or forthcoming. We now have a firm Brexit timeline, as Prime Minister Theresa May confirmed over the weekend that article 50 will be triggered by March 2017. Although concerns over the UK’s position within Europe remain, the data continues to hold up with the final second quarter GDP reading beating expectations at 0.7%. Despite the recent positive data, Sterling continues to struggle. The currency ended the day flat on Friday, and lost further ground over the weekend, to test the recent lows and cement its place as the weakest major currency in the third quarter. US GDP rounded out the week with an improved final figure, adding further strength to the case for a US rate hike, which will boost the currency further.
The markets will continue to look at the banking sector, and whether the share price of Deutsche will continue to move higher following Friday’s bounce, as concerns ease over their capital position and the level of the US fine. The focus now shifts to a potential fine for RBS from the US Department of Justice, which was rumoured in the weekend news to be up to $10bn. Outside of the banking sector, UK Manufacturing PMI will be in focus, with weaker expansion expected compared to last month. Meanwhile in the US, ISM Manufacturing figures could add further support to the case for a hike, with a return to expansion.
There is a rather light data calendar on Tuesday, but the UK Construction PMI figure will be the main focus. The reading is forecast to move back to expansion. Over Monday night, the rate decision from the Reserve Bank of Australia will be published, which is expected to hold rates at 1.5%. Otherwise, the market may find further interest in a speech by Federal Reserve member Lacker.
The trio of PMI readings for the UK are concluded on Wednesday, with the largest component; services expected to fall back slightly from the August’s strong reading. The three readings will give a good indication of how confidence is holding up in the UK economy. There will be similar data releases from Europe as Italy and Spain release their services PMI, whilst we have the Retail Sales figure from Europe as a while. The focus will then shift to the employment situation in the US with ADP employment as a precursor to Friday’s Non-Farm payrolls.
There will be a light data calendar as the market takes a breather before a busy Friday. There will be no major releases from the UK, as German Construction PMI and factory orders will be the biggest releases of the day. The German data will be closely watched to see whether the European powerhouse of growth continues to slow. The US initial jobless claims will be the highlight of the afternoon.
This week ends with a bang, with significant data releases. Firstly, the UK will publish Industrial and Manufacturing Production figures along with the UK Goods Trade Balance. These figures are expected to show minor increases which does not offer a lot of support for a currently struggling Pound. The biggest data release of the day is the US Non-Farm payrolls, which will no doubt lead to some short term volatility. Markets are expecting a bounce from last month’s 151k reading towards 170k. We will also see the participation rate and Average Hourly Earnings figure added to the employment picture, whilst a number of Fed speakers will lend their view on what these employment numbers mean for rate hikes.