You might think that the economic news might be slowing down this week after the week we have just had. Alas, that is not so; this week's forex market might be just as choppy with some critically important reports emanating from Japan, China, Europe, and the UK, in particular.
Due on Wednesday, US Retail Sales growth for October is anticipated to increase by 0.7%, the same as September's Retail Sales growth. However, with supply constraints potentially inspiring people to complete some Xmas shopping early, a surprise beat might be on the cards for this report.
Back over the Atlantic, the UK releases its CPI data for October. The YoY CPI for the UK currently stands at 3.1%, after edging down from 3.2% in September. Septembers CPI dip might be temporary, and several factors indicate that CPI could rise with Octobers data. Chief among them is the flow-on effect expected from the UK factory gate prices rise to 6.7% in September, from 6.0% in August.
On Thursday, it is Canada's turn to release CPI data. After Septembers data, Canada's inflation rate was running at an 18-year high of 4.4%. Market consensus is pointing toward a fifth straight increase in the CPI, to 4.6%, while TradingEconomics predicts an even more significant leap to 4.9%.
We end the week with Japan noting its CPI data for October. Sustainable price growth in Japanese consumer prices is in doubt moving forward. Last month, CPI hit 0.2%, after remaining below 0.0% since the latter half of 2020. However, Japanese businesses are largely absorbing the rise in their input costs, whether temporary or permanent, rather than passing them onto consumers.
Who else feels like this year has gone by so quickly? Each week ahead article, I have been talking about how the election is coming and how volatile times are coming ahead. Now we are neck-deep into election season, with the first one in New Zealand granting Jacinda Ardern and her party a landslide victory, enabling them to govern themselves. All eyes now are on the Presidential Election in the United States and the Brexit outcome between the UK and the EU. Here is your week ahead.
Note that Jerome Powell is set to speak on Monday – however, this is regarding digital currencies that may provide good information on his stance on digital currencies, but is unlikely to move the market much unless he provides other viewpoints on the future of the economy.
Everyone likes to talk about how well New Zealand handled the Coronavirus, with the nation opting for an elimination strategy rather than a suppression strategy. However, not many talks about China's statistics. They, too, went with an elimination strategy rather than a suppression strategy and have achieved results similar to that of New Zealand.
Coronavirus is all but a memory in Mainland China, especially in Wuhan, where the virus originated. A Bloomberg Poll of economists expects China to a third-quarter economic growth rate of 5.5%, which is near pre-Coronavirus levels. Morgan Stanley believes this is due to "very strong exports and the gradual improvement in domestic consumption," citing higher exports in the previous month.
Furthermore, China's central bank is set to release its decision on interest rates later this week. Unlike the rest of the world, which cut rates at the start of the Coronavirus pandemic, China opted to restrain in cutting rates in favor of the fiscal policy. Ma Jun, a PBoC adviser, stated earlier this year that "the PBOC doesn't use its bullets all at once. China has plenty of room in monetary policy". And it seems like analysts predict to keep it that way, with the consensus being that the PBOC will keep rates unchanged at 3.85% this week ahead.
With a second wave of the Coronavirus hitting Europe as they enter into their winter seasons, Christine Lagarde is expected to reiterate further support for the economy and the central bank's relatively bearish stance. With lax lockdown measures in the UK and Spain, alongside many partial reopening's around the nations in Europe, has wreaked havoc as the second wave in many countries nearly doubles or even triples the new daily cases seeing the first wave.
Furthermore, PMI's are set to come out for both the EU as a whole and Germany. Analysts predict EU PMI's to drop below 50, to 49.5, showing a consensus of contraction in manufacturing in October.
Australia has tamed its second outbreak of the Coronavirus, providing the opportunity for a quasi "trans-tasman" bubble that has been talked about between them and New Zealand. As things return to relative normality in Australia, many cities in Melbourne, Victoria, continue to be in a state of lockdown, which may weigh on the Retail Sales figure, which is predicted to drop by 4% this month.
The mismanagement of the Coronavirus by Prime Minister Boris Johnson has put the UK in a terrible position. Even with a second lockdown, the Coronavirus continues to post double-digit new cases each day, way more than the first wave. With Boris keen to get business back on track, his focus became on ensuring economic downfall was minimized as much as possible. However, as shown by countries that opted for a full elimination strategy rather than a suppression strategy, the first step in an economic recovery is eliminating the virus.
The UK seems to have skipped that bit and opted to recover without fully squashing the virus. This has lead to disastrous consequences, with England's deputy chief medical officer Professor Jonathan Van-Tam resorting to hopes that the UK can roll out a Coronavirus vaccine "soon after Christmas" A restriction in demand in the UK alongside many subsidies has forced business in the UK to raise their prices – therefore, analysts predict an increase in the CPI this month by 0.5%.
Another country that opted for a relatively loose lockdown – who encouraged, but did not enforce, citizens to stay at home is facing the consequences. A second wave has hit many Canada regions, with 80% of the cases having stemmed from Ontario and Quebec, its two most populated provinces. However, the government still has not ordered a complete lockdown, with Ontario closing certain establishes like gyms, movie theatres, casinos, and restaurants. Analysts predict the rate of CPI increase to drop slightly by 0.7%.
New Zealand has been the poster child for how the world wishes they initially handled the Coronavirus. As I stated many times already, New Zealand opted for an elimination strategy, and has seemed to work. "Hard and Fast," the Motto Prime Minister Jacinda Ardern went by, seemed to work, with New Zealand back to a relatively normal. The Coronavirus success has also won many voters' hearts this weekend, with elections giving her and the party a second term with a landslide victory. They retained 49% of the votes, enabling them to govern alone. With that said, there are mixed thoughts regarding CPI figures this week ahead, with last month's print showing a 1.5% increase.
A lot has happened since the last Presidential Debate. President Donald Trump contracted Coronavirus, a new stimulus bill has been proposed, and Biden's son Hunter Biden has been in the news for leaked emails. Personally, I do not think the debate will provide much insight into future policies. It will be more comedic than anything. If anything, I believe this is a period where traders and investors should keep trading at a low, as both candidates' comments may whipsaw the market – as shown by the previous debate.
Stay safe, Trade safe.