Trump and Powell

The Week Ahead – Trump, Trade, Powell and Policy in Focus

On the Macro

For the Dollar, key stats for the week include July existing home sales figures due out on Wednesday, new home sales and August prelim private sector PMI numbers on Thursday and July durable goods orders on Friday. FOMC meeting minutes due out on Wednesday and Jackson Hole Speeches on Friday will also influence, though it may boil down to Trump and geo-political risk. The Dollar Spot Index ended the week down 0.27% at $96.101.

For the EUR, it’s a relatively quiet week ahead, with key stats including wholesale inflation figures out of Germany on Monday, private sector PMI and Eurozone consumer confidence numbers on Thursday and 2nd estimate GDP numbers out of Germany on Friday. While focus will be on Germany’s manufacturing PMI and 2nd estimate GDP figures, the ECB’s monetary policy meeting minutes on Thursday will also provide direction.  The EUR/USD ended the week up 0.22% to $1.1438.

For the Pound, it’s a particularly quiet week ahead, with stats limited to August CBI Industrial Trend numbers that will unlikely influence, focus likely to be on Brexit talks. The GBP/USD ended the week down 0.07% to $1.2749.

For the Loonie, June wholesale sales on Tuesday and retail sales figures on Wednesday will provide direction, though direction through the week will be hinged on market risk appetite and any updates on NAFTA. The Loonie ended the week up 0.60% to C$1.3061 against the U.S Dollar.

Out of Asia, it’s relatively quiet week ahead.

For the Aussie Dollar, with stats are limited to 2nd quarter construction work done numbers due out on Wednesday, we will expect trade chatter to influence, the U.S and China due to meet at the negotiating table. The AUD/USD ended the week up 0.15% to $0.7313.

For the Japanese yen, it’s a quiet week ahead, with stats limited to prelim August manufacturing PMI numbers on Thursday and July inflation figures on Friday. Friday’s inflation numbers will be the key driver on the data front, while geo-political risk will continue to provide direction for the Yen. The Japanese Yen ended the week up 0.30% to ¥110.5 against the U.S Dollar.

For the Kiwi Dollar, it’s a relatively busy week ahead, with 2nd quarter retail sales figures due out on Wednesday and July trade figures on Friday. We will expect both sets of numbers to provide direction, though the numbers are going to need to impress to shift policy sentiment. The Kiwi Dollar ended the week up 0.71% to $0.6637.

Out of China, with no material stats scheduled for release through the week, focus will be on trade, with the U.S also threatening sanctions on China should they fail to cut back on oil imports from Iran. Talks are due to start on Wednesday.


On the political front, the list just seems to be getting longer as the U.S mid-term elections approach

Turkey: Turkey’s troubles are far from over, with sovereign rating downgrades raising the stakes. U.S President Trump is unlikely to back down, the threat of more sanctions raising the stakes, which could see more market disruption in the week ahead should the Turkish President be unyielding.

Loonie Woes: NAFTA talks between the U.S and Mexico are to continue in the week, with progress likely to be considered a positive, Canadian government officials waiting on the side lines for now.

U.S – China Trade War:  News of planned talks between the U.S and China supported the markets on Friday, though with neither Trump or Xi at the table and China’s vice minister of commerce leading talks from China, leaving limited hopes of progress, which could weigh on risk in the week ahead, some rhetoric likely to be flying around ahead of talks scheduled for Wednesday and Thursday, when 25% tariffs are due to be imposed on $16bn worth of Chinese imports.

Iran: Things have just got a little more challenging, with the U.S threating sanctions on China should they import crude oil from Iran beyond the November zero import date. Will China ignore the threat at a time when the economy is already under fire amidst the current trade war with the U.S? An about turn would not only hurt the Iranian economy, but further destabilize the regime’s power. For now, China has stated that cooperation with Iran is to continue, which won’t go down well with Trump and team.

Brexit: Brexit talks have resumed and there’s been no good news to report, Ireland’s border issue continuing to be the area of focus. The clock is ticking and the probability of a no deal scenario is rising. Movement in the Pound through the week ahead can be expected from updates on talks and on whether diplomatic efforts across the region to garner support for the Exchequers white paper have paid off.

The Rest

For the U.S Dollar:

FOMC meeting minutes: Due out on Wednesday and will provide some direction, though we can expect focus to be more on Jackson Hole at the end of the week, barring unexpectedly dovish language.

Jackson Hole: FED Chair Powell is scheduled to speak on Friday on “monetary policy in a changing economy.” Recent data out of the U.S has been mixed and the ongoing trade war has muddied the waters. The markets will certainly respond to any concerns the FED may have on the economy and how the FED plans to battle any weakness. By historical standards the FED has nowhere near the monetary policy buffer of old to combat an economic slowdown or recession.

For the EUR, the ECB monetary policy meeting minutes are due out on Thursday and, while Draghi delivered another performance at the last ECB press conference, market jitters over trade and Turkey may overshadow the minutes that are unlikely to deliver any surprises.