The economic docket is crowded with potentially market-moving data releases this week; none more so than Wednesday’s Federal Open Market Committee (FOMC) rate decision and QE3 target.
Monday is the quietest day with just US information to deal with. Industrial Production is predicted to have held steady at 0.4% during September, whilst Manufacturing Production is expected to have decelerated from 0.7% to 0.3%. The figures are likely to have a mildly negative impact on the US Dollar.
On Tuesday we should get further confirmation that the UK housing market is performing at its best level since the financial crisis, as Mortgage Approvals for September are set to eclipse last month’s 5-year high of 62,200. If predictions of 66,000 are proved correct then worries that the Bank of England’s Help to Buy scheme is inflating another housing bubble will surely come back into focus in the UK.
Later on in the afternoon it is likely that an Advanced Retail Sales report will show that US private sector consumption flatlined during September and that US Consumer Confidence was knocked by over 5% due to the government shutdown during October.
The week’s main event, the FOMC rate and QE3 decision, is due to take place on Wednesday. The Federal Reserve is widely expected to leave rates unchanged at the current record low of 0.25% and maintain its current target of purchasing $85 billion of assets per month. The accompanying policy statement, however, is far harder to predict. It will be interesting to see whether the US Central Bank takes a decidedly dovish stance following the damaging debt ceiling debacle – this would likely damage the US Dollar – or whether the Fed will opt to maintain its current policy outlook irrespective to the damage dealt by the 16-day furlough – this would likely have a negative impact on global risk appetite.
The US ADP Employment Change figure for October, which is forecast to show job creation fall by -18,000 to 148,000 in October is also an important gauge of how badly the US economy was damaged by recent events. Estimates suggest that the shutdown wiped off around -$24 billion, or around -0.6%, of GDP, and if this dent in growth is seen to have driven businesses to cut back on hiring then it is likely to support the argument for a longer period of extensive quantitative easing.
Also on tap on Wednesday is the German Unemployment Rate, which is expected to remain steady at 6.9% and the German headline CPI inflation rate, which is likely to come in at 1.4% for a second consecutive month. Barring any surprising revisions, the data is unlikely to have a significant impact on the Euro.
On Wednesday evening the Reserve Bank of New Zealand is expected strike a neutral tone and maintain the current benchmark interest rate of 2.50%. Recent comments form RBNZ Governor Graeme Wheeler suggest that the New Zealand Central Bank is happy to delay a potential interest rate rise until a later date, despite the perceived over strength of the New Zealand Dollar. If the RBNZ report is seen to dramatically reduce the possibility of a rate hike in the near future then the New Zealand Dollar is liable to depreciate.
Thursday morning’s Bank of Japan rate decision is likely to yield some influence over global risk trends, as is Friday’s Chinese Manufacturing PMI result. Also released on Thursday: Canadian GDP is predicted to have slowed from a monthly rate of 0.6% to just 0.1% during August, potentially impacting the downtrodden Canadian Dollar.
On Friday it is anticipated that UK Manufacturing steadied itself in October with a PMI score of 56.4, whilst the US equivalent is predicted to have slowed from 56.2 to 55.1. Dependent on the FOMC announcement remaining fairly dovish, the UK and US Manufacturing numbers are likely to print slightly in favour of Sterling strength against the US Dollar.
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