Last week, the US Dollar made its biggest gain for two and a half months following the sell-off in the stock markets, in particular the Nasdaq (which is tech-led). There was no significant trigger for the sell-off, but commentators have rationalized the long winning streak and potential fears of a second wave of COVID-19. In the meantime, economic data was closely watched from the US for several reasons, including growth momentum, the upcoming presidential election in November and COVID. The headline figure for the week was the US labour data which came out stronger than expected. The headline non-farm payrolls hit expectations of 1.37m, whilst unemployment moved lower and average earnings edged higher. These numbers are likely to help President Trump.
Closer to home, tensions between the UK and the EU don’t seem to be easing. The Prime Minister’s office is reported to only see a 30-40% chance of a post-Brexit trade deal being agreed with the EU before the end of 2020. Currently, at the time of writing, peer to peer betting exchange Smarkets have the odds of no-deal emerging between the UK and EU before the end of 2020 at circa 60%. Over the weekend further tensions have been cited as Chief Negotiator Frost warned that the EU stance may limit the progress that could be made in the talks which resume on Tuesday. In addition, there are reports of new UK legislation which would over-ride the withdrawal agreement of Northern Ireland which may increase tensions sharply.
The Euro weakened last week after reports emerged through various outlets that the ECB was becoming increasingly uncomfortable with the currency’s value. HSBC has said the European Central Bank (ECB) will become increasingly uncomfortable with the Euro’s strength and could seek to curtail it in the future. As a result, all eyes will be on the ECB this week when they meet for suggestions on how it will want to move forward with the policy.
As mentioned, the ECB meeting will be a big focus for the market. Meanwhile, the next formal round of talks between the EU and UK are due to take place in London next week and introduce event risk for Sterling.
- German Industrial Production
- Halifax UK house price index
With growth data in the Eurozone starting to look questionable, the market will focus on the largest economy, Germany, for directional signs of growth.
Following on from the Nationwide UK house price index posting its biggest rise since 2004, the market will focus on the Halifax house price index to see if this trend is echoed.
- UK BRC sales monitor
- EUR employment change
- US Consumer Credit
Retails sales in the UK have been promising since the easing of restrictions with the headline figure showing a growth of 3.6% last month. The British Retail Consortium sales monitor will compare the UK position on an annualised basis whilst also adding some additional colour from the sector. Whilst the monthly sales figures have been promising, the looming concern over the end of furlough may start to bite and raise concern in the retail sector. In the Eurozone, the headline employment figure for is set for release whilst the US consumer credit figures hit the wires.
- US JOLTS Job Openings
Following on from last week’s promising labour data the market will be interested to see if support data continues to echo this positive trend.
- ECB Meeting
- US weekly jobless claims
- US producer price index
Last week, the single currency started the week on a high breaching the psychological level briefly. However, after comments surrounding the concerns about the ECB being uneasy over the strength of the Euro, its strength soon started to fade. The market will look in particular to the statement from the ECB as it is very unlikely that policy will remain unchanged. There may be some tweaks to the forecasts, given the stronger Euro as well as higher oil prices but also as a result of some softer data.
- UK monthly GDP
- UK Industrial and Manufacturing production
- US Consumer Price index
- Eurogroup meeting
UK monthly GDP was positive in contrast to what we saw in Q2. With a solid bounce back in Q3 expected the market continues to focus on the monthly reading to gain a handle on how the recovery continues to advance. In addition, UK industrial and manufacturing production are set for release. Eurogroup meetings for European finance ministers begin and continues into Saturday.
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