Last week saw Sterling lift following the resumption of UK/EU trade talks, after the early week’s standoff between the two respective trading blocks. Whilst fishing and a level playing field remain sticking points, the objective is to conclude discussions for an emergency EU summit in the middle of November. In the meantime, UK Chancellor Sunak announced a more generous Job Support Scheme starting in November as furlough ends this week. Data from the UK remains mixed with retail sales posting slightly better than expected, but the composite PMI activity showed a slowdown in momentum. However, Brexit trade talks and negative rates continue to dominate newswires.
The US election continues to pick up momentum with no real blows landed in the second and final Presidential debate with the US set to head for the polls next Tuesday. Meanwhile, it has been reported that early voting has accounted for nearly a third of the total vote numbers seen in 2016.
The week ahead will continue to focus on the progress of the UK/EU trade talks, and the final furlong in the US election, although there are some concerns surrounding current Vice President Pence as members of his entourage have been diagnosed with COVID.
The centre of attention for the Eurozone will be the ECB meeting on Thursday, the market is not expecting any stimulus until December so the market will focus on signposting by officials to confirm.
- German IFO Survey
- US New Home Sales
Markets will continue to monitor data from both the Eurozone and US as it tries to decipher future policy action. With COVID spreading in Europe and restrictions tightening the IFo composite index. Based on surveyed manufacturers, builders, wholesalers, services, and retailers will provide some insight on how the sector views the conditions; both current and forward-looking. In the US new home sales will continue to be monitored for clues on economic activity.
- US Durable Goods
- US Consumer Confidence
With one week to go before the US Presidential Election, the market will be a focus on economic data as this is one of President Trump’s rationale for remaining in power. Durable goods tend to be larger ticket items as they have a shelf life of more than three years and consumer confidence will provide an update on the consumer market as we head towards the holiday season. A pickup may provide Trump with some relief as the US heads to the polls.
- UK BRC Shop Price Index
- US Crude Oil Inventories
A quiet day on Wednesday with mainly second-tier economic data being released. The UK will focus on the BRC shop price index which provides some insight to shop prices and therefore subsequent economic activities. While with economic conditions continuing to face headwinds, the market will focus on crude oil inventories and the subsequent effect this could have on prices and inflation.
- ECB Meeting
- US GDP (Q3 – first reading)
Rhetoric from the European Central Bank (ECB) in recent months has suggested they are in no hurry to add to its stimulus measures. However, evidence of increasing economic headwinds related to a second wave of coronavirus infections means that it is readying to act. Currently, the market is forecasting further stimulus measures for December (that doesn’t mean they won’t pull the trigger early) and are expecting the ECB to wait for further data confirmation before implementing. The market will focus on the language used for clues on whether December lines up with expectations.
Following the crash in Q2 economic growth (-31.4%) the market will be focusing on the size of the rebound. With the election just around the corner, President Trump will be hoping that these numbers are strong.
- GER/EU GDP (Q3 – first reading)
- US UoM Consumer Confidence
Like the US the day prior, the GER/EU GDP numbers will be focused on how much of the contraction from Q2 can be clawed back. Depending on what was said at the ECB meeting the day before, the market could react based on the further stimulus signposting. In the meantime, a further consumer sentiment reading is set for release from the US in the form UoM consumer confidence.
Last month, both UK manufacturing and services PMIs slipped from very high levels in August but stayed well above the key 50 levels consistent with economic expansion. Further slippage in October is expected, but for both measures to stay above 50 and so signal continued growth. In the Eurozone, September saw a sharp fall in the services reading below 50, but a modest rise in manufacturing. If both sectors continue to lose momentum it could result in the composite measure below 50 for the first time since June.
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