APAC should be hogging most traders’ attention in the first half of the coming week. China and New Zealand take the spotlight up to Wednesday. A sprinkling of US and European data helps to round out the offerings.
*Please note; Author is working from UTC +13 when determining the timeline of data releases.
China opens the week and reveals its 1Y Loan Prime Rate. The People’s Bank of China (PBoC) has kept the 1Y Loan Prime Rate at 3.85% for the past 18 months. No change in the rate is expected on Monday. However, looking to a long-term change, China’s Premier Li Keqiang noted on Friday that China is facing “many challenges” in managing the downward pressure on its economic growth and rising commodity prices.
New Zealand releases data on Retails Sales (Q3) in the lead up to the country’s Central Bank Interest Rate decision on Wednesday. Retail Sales in the last two quarters rose 3.3% and 2.8% respectively. A projected -0.5% is expected in Q3 as the country’s largest city has been in lockdown for the entire Q3 period.
European and Great Britain Markit PMI Composite data (NOV) is also released on Tuesday. Aggregating the data from the economies’ Manufacturing and Service sectors, the PMI is a broad indicator of economic expansion or retraction. Although still firmly within an expansionary range, a slight pullback in the PMI values is expected for both economies.
US Markit PMI Composite data (NOV) is up next. Unlike Tuesday’s PMI data, US PMI is expected to lift ever so slightly from 58.4 to 58.8.
As mentioned above, the Reserve Bank of New Zealand (RBNZ) will be updating the market as to its Interest Rate decision. A 25 basis point hike to 0.75% is all but guaranteed at this point. Speculation of a 50 basis point hike has emerged in reaction to Inflation Expectation in the country, reaching 2.96% in two years. Although, such a significant hike is unlikely and deviates from RBNZ precedence.
Thursday is all about the United States. For October, durable Goods Orders, New Home Sales, and Personal Spending data are released in quick succession. Any beat or miss in the slightly optimistic forecasts for these data points should be pounced upon by traders.
The FOMC minutes are then released later in the morning. Fed representatives have been vocal about their stance on inflation, employment, and the need to keep a loose monetary policy for the short term, all last week. These notes should be reflected in the FOMC minutes.
A quiet Friday closes the week. South Korea’s Interest Rate decision should be watched closely. A 25 basis point increase is possible, which would bump the Interest Rate to 1% from 0.75%. Analysts are split as to its likelihood as the South Korean Government has other tricks up its sleeve to curb rising prices (such as removing fuel taxes).
As the news cycle slows, with the election in the past alongside initial vaccine hype fading away, it is essential to realize that not only is the Coronavirus continuing to ravage the economy, it continues to ravage the families and lives of many around the world.
Many have turned the Coronavirus into a statistical exercise, looking into the future when we eventually look past the Coronavirus. However, it is currently a present problem, with present consequences. Keep this in the back of your head when you trade and invest. Here is your week ahead.
Like many countries in Europe, Germany is experiencing a spike in cases larger than the first wave. They recently recorded 23,000 new cases yesterday. This has directly affected service sector activity, with HIS Markit's flash services PMI's fell to 46.2 from 49.5 in the previous month. Remember, a print below 50 entails a contraction in manufacturing. Analysts forecast Germany to post its deepest recession since World War Two.
In terms of the most frustrated, I am at a country in terms of their Coronavirus response; I am most frustrated in the UK. They had the resources to implement a robust early Coronavirus response. However, Bureaucracy and trying to balance economic damage and human life has placed the UK on its knees. At its peak, the UK recorded over 34,000 daily Coronavirus cases.
After placing a lockdown on citizens, Prime Minister Boris Johnson plans to end the lockdown on 2nd December. However, daily Coronavirus cases still rack up, around 20,000 per day. For reference, New Zealand and Australia lifted restrictions once there were consistently zero community Coronavirus cases. However, the second lockdown could not push the UK's PMI's further down, printing 45.8 with an analyst consensus for 42.5. However, a third wave will push this figure further down.
While the Coronavirus stops many businesses from operating, one sector that was affected less was freight. However, with Australia heightening tensions with China, their largest trading partner, their Trade Balance may see a drop in the next print. Canberra's Officials stated that reports on Chinese authorities telling Chinese buyers to stop purchases of Coal, copper, wine barley, sugar, lobster, and timber as "deeply troubling.
"On the other side of the bond, Beijing has accused Australia of "anti-China hysteria," about Australia prompting an investigation into the origins of the Coronavirus vaccine in China. The previous trade balance was 5.63 Billion.
Japan is one of the only countries that are experiencing the third wave. Each consecutive wave has been larger than the previous in Japan. The method they have adopted, called the "Japan Model," has effectively curbed the spread of the virus in the country.
However, as the third wave is currently in full swing, experts state that the strategy is approaching its limits. Kuroda predicts that "the economy is likely to hit bottom around April-June and is expected to continue improving as a trend" and that it "will help price growth turn positive and gradually accelerate toward [their] 2% inflation target." He further stated that if they hit their 2% target, an "exit from [their] massive stimulus program will come into sight." However, he believes it's currently premature to do so at this stage.
Having beaten the Coronavirus, New Zealand is well on its way to its recovery. With the RBNZ removing LVR's and lowering interest rates earlier this year to cushion the economic effects of the Coronavirus, they have placed it back, quoting "financial stability". Interest rates continue to be at record lows, allowing investors and first home buyers to attain record-low mortgage rates. This has pushed the average house price of over a million dollars in Auckland for the first time.
House prices have been a heated topic with politicians and citizens of New Zealand, with buyers struggling to get into the market and owners going all to increase their assets. However, the RBNZ refuses to implement policy to house prices, stating that "that is not their mandate", and that their mandate is employment and inflation. Orr's speech this week ahead may further see him cement RBNZ's stance on house prices.
The United States recorded 198,585 new cases of the Coronavirus on the 20th November, just shy of the somber record of 200,000. With the country recording an annualized rate of 33.1% during the third quarter showing the effects of government stimulus and quantitative easing by the Federal Reserve, many analysts predict a slowdown in the couple of quarters to come. Aneta Markowska, Chief Financial Economist at Jefferies, wrote in a report to clients on Thursday that "The outlook for Q4 is very shaky in our view" and that "The economy has already lost a lot of momentum over the summer."
Not as a busy week ahead compared to previous weeks. However, news on a Coronavirus vaccine should be watched out for, as it could trigger a risk-on / risk-off event in all assets across the markets. Stay safe, trade safe.
Trump skipped the G20's "Pandemic Prepardness" event to play Golf on that beautiful, cloudy day.
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.
Hello traders! This week ahead, we have many events that directly affect significant currencies such as the GBP, USD, the NZD, and the Euro. Traders should be aware of these critical events not to be whipsawed by the market. Here is your week ahead
UK Inflation dropped sharply to 0.2% in August, as stated last Wednesday, primarily due to the governments' "eat out to help out" scheme, pushing restaurant and café prices lower. After July's higher CPI figures, this conveyed the strong influence the "eat out to help out" scheme had on meal prices. The report explicitly talks about Inflation. However, implicitly talks about what the UK's treasury economic outlook is. A dovish tone may send the GBP against the US lower this week ahead.
We can't seem to escape Jerrome Powell, can we? Dubbed as the Reserve Bank of the World, the Federal Reserve of the United States' economic outlook and changes in policies directly affects traders' and investors' sentiment. It is without saying, traders and investors should be looking at these speeches this week ahead like a hawk to examine any change in Powell's tone about the economy. A more than expected dovish tone should push the USD higher against major currencies, vice versa.
Similar to the Inflation report hearing, Governor Bailey's speech will set the tone for the future of the UK's economy. However, what traders should be looking out for is whether Governor Bailey will give any hints on implementing negative rates in the UK. If he does, this would be a contrast to his position a couple of months ago, which could significantly see the Cable drop.
Australia has had a fierce battle with the Coronavirus. After having initial success with battling the Coronavirus without a strict lockdown, a massive spike in Melbourne, Victoria, has caused a setback of setbacks. A trans-Tasman bubble touted to be around mid this year has been pushed back to at least March 2021. Conditions are better now in Victoria, with the state reporting its lowest increase in Coronavirus cases in three months of 28. This is, in contrast, to triple-digit growth a month ago. With National Australia Bank (NAB) posting an increase of online retail sales of 62.6%, analysts predict a rise in retail sales from 3.2% the previous month. This may provide a push for the Australian dollar higher this week ahead.
New Zealand has been relatively prosperous in controlling the Coronavirus in comparison to other countries. However, that success has come at a brutal economic cost. New Zealand has suffered a 12.2% drop in GDP, higher than Australia, and the OECD average of -7% and -10.6%. With the market pricing in a 72% probability of a rate cut next year (Source: Bloomberg), a rate cut this early will send the New Zealand dollar spiraling downward. However, market consensus predicts that rates will stay the same at 0.25%. All eyes will be on Adrian Orr, which may give a better indication for the timeline of negative rates in New Zealand.
Just some personal perspective. There has been some speculation that the reason why the RBNZ has not implemented negative rates as of yet is to get banks to get their systems ready and bee prepared when negative rates do come. Furthermore, evidence has been shown in mortgage rates. Or more, the duration of low-interest mortgage periods. A couple of months ago, banks would offer 2.55% mortgage rates for six months. However, now, banks are only offering the same quality for one year. This suggests that they are trying to lock borrowers in these rates for a more extended period to minimize remortgages' wave once negative rates come in early 2021.
Europe has faired well regarding the collaboration between the countries regarding the EU's reaction to the Coronavirus in terms of fiscal and monetary policy. With that said, individual states have had different outcomes when it comes to the Coronavirus. Pair that with countries such as Greece and Italy facing economic distress before the Coronavirus, and you have a mixed bag when it reaches the individual countries' future. PMI's measure bearish/bullish sentiment for manufacturing. A figure above 50 signals expansion, while a figure below 50 shows contraction. Consensus state that the UK is set to release a PMI of 56. While still expanding, expansion is less than in the previous month when it was 58.8. Europe is set to release a PMI of 51.7, slightly lower than the 51.9 the last month. Germany is set to release a PMI 54.2, marginally lower than the 54.4 of the previous month.
Busy week ahead as we continue to tackle the Coronavirus around the world. Stay Safe, Trade Safe.
Busy week ahead as September kicks in. As New Zealand and the United States elections slowly approach, the Coronavirus pandemic will most likely be the center focus for many parties and how they handle the post Coronavirus world. Here is your week ahead.
Like most of Europe, Germany is experiencing an uptick in cases as a reopening of Europe too early takes its toll. However, this has not stopped protesters storming the German Government building in Berlin alongside Germany's total cases ticked over 243,000. With prices of oil slowly increasing, analysts expect inflation to increase slightly by 0.1%. Furthermore, with Germany's unemployment benefit allowing unemployed citizens to claim up to 67% of their previous wage, analysts predict no change in the unemployment rate at 6.4% in the week ahead.
Australia continues to fight a hard battle with the Coronavirus, after their original strategy of having no lockdown has lead to massive spikes in Melbourne, Victoria. Australia recorded 123 new cases of the Coronavirus – all in the state of Victoria. Denita Wawn, Master Builders Australia's Chief Executive, stated that "Our industry is facing a blood bath… Private sector investment is evaporating, and the government must step in to save businesses and jobs," conveying how dire the situation is in Australia. However, the Reverse Bank of Australia is expected to hold interest rates at 0.25%. Any deviation from this consensus is most likely to move the Australian dollar significantly. Furthermore, Melbourne's sustained lockdown has seen forecasts of GDP growth to drop to -5.3%, down 6.7% GDP growth of 1.4% in the previous quarter.
One of the country's worst-hit with the Coronavirus, Italy, has recorded over 268,000 cases with cases continue to spike, with newly registered cases yesterday just over 1,200. Italy is predicted to be one of the first to get a grant from the Bloc's 750 Billion Euro grant as it suffers from worsening GDP growth pre-Coronavirus. Italy is set to release Manufacturing PMI's to 52, slightly higher from 51.9 last month.
Europe is currently experiencing a resurgence in Coronavirus cases as an early lifting of lockdowns just before Summer has forced a spike across Europe. However, many countries are against a second lockdown due to the Economic calamity it will bring. Analysts predict a drop in the inflation growth rate to 0.9%, down from 1.2% in July.
The United States continues to post daily double-digit Coronavirus cases as their total case count tops 6 Million. As elections approach in just over a month, President Donald Trump continues to let the economy open to win over voters. Non-farm payrolls are predicted to be just over 1.4 million, down from a previous 1.73 million print.
As usual, we have many critical economic events that traders need to watch out for to avoid being whipsawed by the market in the week ahead.