Last week was a turbulent period for the U.S. dollar amid the jobs report, stock price movement, and the heightened possibility of a trade deal between China and the U.S. becoming real. The stock markets continued to struggle initially following reports that the U.S. is likely to announce new tariffs for Chinese goods. However, the situation turned around towards the latter part of the week following Trump’s talk with Chinese President Xi. Trump asked his cabinet members to draft the trade deal. This news drove the risk currencies soaring against the USD and JPY.
Earlier last week, the euro was also under pressure as Italy reported zero growth in the third quarter, making it difficult to resolve the crisis. Angela Merkel, the German Chancellor, said that she will not contest again because of the disappointing regional election results. In the U.K., the government announced a positive budget. However, many of the market participants considered it as a step taken with elections in mind.
In the upcoming week, the Mid-Term Elections in the U.S. and Fed decision stand out. A number of key releases are also scheduled from elsewhere in the world. Here is an outlook on some of them:
#1: U.K. Services PMI (11/05/2018 Monday 09:30 GMT)
In the U.K., the IHS Markit/CIPS Services PMI dropped to the 53.9 level in September from its 54.3 level in the prior. The reading for the month also came in slightly below analysts’ expectations of the 54.0 mark. Easing of growth in new orders and the level of optimism remaining subdued amid global trade tensions and political uncertainty contributed to the decline. However, the job creation rate was the strongest ever since February. Input cost inflation rose to the highest level in three months because of rising fuel prices and higher wage bills. Output charges increased at the slowest rate ever since June 2017. Forecast for October 2018: 53.4
#2: Canada BoC Governor Stephen Poloz Speaks (11/05/2018 Monday 13:10 GMT)
Stephen Poloz, Governor of the Bank of Canada, is scheduled to speak on the subject “the financial markets and implications for monetary policy” in London at the Canada-UK Chamber of Commerce. The text of his speech will be released at the listed time. He will deliver the speech 15 minutes later. He will also hold a press conference 80 minutes after the text is released. Markets often remain volatile during his speeches. This is because traders make an attempt to understand the direction of interest rates in the future.
#3: U.S. ISM Non-Manufacturing PMI (11/05/2018 Monday 15:00 GMT)
In the U.S., the ISM Non-Manufacturing PMI rose to the 61.6 level in September from its 58.5 level in August. The reading for the month beat analysts’ expectations that the index will hit the 58.0 level. The reading indicated that the growth in the services sector was at a record level. Overall, the companies remained positive as regards business conditions and the current as well as the future economy. However, concerns remained about capacity, logistics, and the uncertainty related to global trade.
#4: Australia RBA Rate Statement (11/06/2018 Tuesday 03:30 GMT)
The Reserve Bank of Australia releases the Rate Statement of the first Tuesday of every month, except January. The RBA’s Reserve Bank Board uses the Rate Statement as a tool to communicate with the investors as regards the monetary policy. It provides details about the policymakers’ decision on interest rates. It also provides a commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook and offers clues on future decisions.
#5: U.S. Congressional Elections (11/06/2018 Tuesday All Day)
The midterm elections in the U.S. in November will mark Donald Trump’s two years in office. This is a test to know as to how the Republican Party is performing as far as the American public is concerned. Elections for the U.S. Congress and governorships take place once in two years. The House of Representatives and the Senate, the two chambers that make up the U.S. Congress, are currently under the control of the Republicans. However, pundits opine that the elections might witness a “blue wave”, meaning the Democrats may sweep into power.
#6: New Zealand Employment Change and Unemployment Rate (11/06/2018 Tuesday 21:45 GMT)
In New Zealand, employment rose by 0.5 percent in the June quarter of this year after seeing a 0.6 percent increase in the prior period. On a yearly basis, employment rose 3.7 percent, driven by an increase in the hiring of women workers. Forecast for September quarter 2018: an increase of 0.5 percent is expected
Meanwhile, the unemployment rate rose to 4.5 percent from the nine-year low level of 4.4 percent in the prior period. Analysts had expected the unemployment rate to come in at 4.4 percent. The reading for the June quarter ended a five-quarter falling streak. The number of unemployed people rose by 4,000 to 124,000 and the labor force participation rate increased to 70.9 percent. Forecast for the third quarter of 2018: 4.4 percent
#7: New Zealand Inflation Expectations (11/07/2018 Wednesday 02:00 GMT)
In New Zealand, Inflation Expectations rose to 2.04 percent in the September quarter of this year from 2.0 percent in the previous quarter.
#8: New Zealand RBNZ Official Cash Rate (11/07/2018 Wednesday 20:00 GMT)
New Zealand’s central bank decided to leave the official cash rate steady at the record low level of 1.75 percent during the meeting held on September 26, saying that the economic projections have changed a little bit since the previous meeting. Policymakers said that the GDP expanded in a stronger manner than expected in the June quarter, but the downside risks to growth continued to weigh the economy down. Further, the policymakers stressed that the rates are likely to remain at the current level through 2019 and 2020. They also said that the interest rate could move up or down at the next meeting. The Reserve Bank of New Zealand last changed the Official Cash Rate in November 2016. Forecast for November 2018: 1.75 percent
#9: New Zealand RBNZ Monetary Policy Statement (11/07/2018 Wednesday 20:00 GMT)
Released on a quarterly basis, the Monetary Policy Statement provides valuable information on the central bank is viewing inflation and economic conditions. In the Monetary Policy Statement, the Reserve Bank of New Zealand is mandated to provide details as to how the inflation targets will be achieved and how the monetary policy will be formulated and implemented over the next 5 years. It also provides information on how the monetary policy was implemented since the release of the last statement.
#10: New Zealand RBNZ Rate Statement (11/07/2018 Wednesday 20:00 GMT)
The Reserve Bank of New Zealand releases the Rate Statement 8 times in a year. The central bank uses it as a tool for communicating with investors as regards the monetary policy. The Statement provides the outcome of the policymakers’ decision on setting interest rates and a commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook and clues on future decisions.
#11: New Zealand RBNZ Press Conference (11/07/2018 Wednesday 21:00 GMT)
The Reserve Bank of New Zealand holds a press conference every quarter at every other interest rate announcement. The press conference lasts for about 30 minutes. It has two parts: a reading of a prepared statement and questions by the press. As press questions often lead to unplanned answers, market volatility can be expected during the period.
The central bank uses the press conference as a tool to communicate with investors a regards the monetary policy. It provides all detail as regards the factors that impacted the interest rate decision. The key factors that impact interest rate decision are inflation and the overall economic outlook. More importantly, clues, as regards future monetary policy decision, are provided.
#12: U.S. FOMC Statement (11/07/2018 Thursday 19:00 GMT)
The U.S. Federal Open Market Committee releases the Statement eight times in a year. Normally, the FOMC changes the statement a little at each release. Traders focus on these changes. The FOMC uses the Statement as a tool for communicating with investors as regards the monetary policy. It provides the outcome of the members’ vote on setting interest rates and implementing other policy measures. In addition, it provides a commentary on the economic conditions that impacted their votes. More importantly, the Statement provides a projection of the economic outlook and offers clues on future votes.
#13: U.S. FOMC Interest Rate (11/07/2018 Thursday 19:00 GMT)
In the U.S., the Federal Reserve hiked the federal funds rate’s target range by 25 basis points to 2.0 percent – 2.25 percent during the meeting in September. This was very much in line with analysts’ expectations. Policymakers said that one more interest rate hike can be expected this year. Further, three increases in 2019 and one in 2020 are expected. Forecast for November 2018: 2.0 to 2.25 percent
#14: Australia RBA Monetary Policy Statement (11/09/2018 Friday 00:30 GMT)
Released on a quarterly basis, the Monetary Policy Statement of the Reserve Bank of Australia provides valuable information about the central bank’s view on inflation and economic conditions. These are the key factors that shape the monetary policy and impact the interest rate decisions.
#15: U.K. GDP (11/09/2018 Friday 09:30 GMT)
The British economy remained flat in August. The official figures suggested a slowing down of growth following the World Cup. According to the Office for National Statistics, the GDP growth rate dropped to 0 percent from 0.4 percent in July. The reading for the month missed analysts’ expectations for a 0.1 percent expansion. According to analysts, there is slack in momentum after the robust growth seen during the summer season. They also pointed out that the weakness seen in August might be indicative of the weaker economic growth in the coming months amid increasing concerns because of the risks of a no-deal Brexit. However, the quarterly GDP data showed the strongest growth in as many as two years. Forecast for September 2018: 0.1 percent growth is expected
#16: U.K. Manufacturing Production (11/09/2018 Friday 09:30 GMT)
In the U.K., manufacturing production fell 0.2 percent on a month on month basis in August. Analysts had expected a 0.1 percent increase and following the flat reading reported in July. Downward contributions came mainly from manufacturers of chemical products, wood, paper and printing, machinery and equipment, pharmaceutical products, and electrical equipment. Forecast for September 2018:
#17: U.K. Preliminary GDP (11/09/2018 Friday 09:30 GMT)
The U.K. recorded an economic growth of 0.4 percent on a quarter-on-quarter basis in the second quarter of this year, unchanged from the preliminary estimate. The reading for the period came in higher than that of the prior period’s 0.1 percent expansion. While the household consumption increased faster than initially estimated, the business investment unfortunately contracted. Preliminary GDP estimate forecast for the third quarter of 2018: 0.6 percent
#18: U.S. PPI (11/09/2018 Friday 13:30 GMT)
In the U.S., the producer prices for final demand goods increased 0.2 percent in the month of September, following the 0.1 percent decline in August. The reading for the month was in line with analysts’ expectations. The producer prices rebounded because of the higher cost of services. However, the cost of goods decreased 0.1 percent, after remaining unchanged in August, because of a decline in energy costs. Forecast for October 2018: an increase of 0.2 percent is expected