Forex News – action-packed week for markets ahead with ECB and NFP
November 4, 2013 9:06 am
The current week is expected to feature many interesting events for market participants. This is particularly the case given the markets’ big focus on the monetary policy of developed countries’ central banks and the forward guidance they are issuing.
The week starts in more quiet fashion as on Monday, various manufacturing (PMI) and economic sentiment surveys are released in Europe.
Purchasing Managers’ Index surveys are important leading indicators for the economy and have shown to have strong predictive powers for economic growth.
On Tuesday, the most important indicator will be the US ISM non-manufacturing index for October, followed by UK retail sales and services PMI and the Chinese HSBC services PMI. Given the unexpected strength of the manufacturing ISM the previous week, it will be interesting to check whether services in the US are keeping pace.
Wednesday will feature the industrial and manufacturing output of the UK as well as the services PMIs out of the Eurozone. Eurozone retail sales for September will also be interesting to watch as the Eurozone consumer has had to cope with record high unemployment.
Thursday will feature the central bank meetings of both the UK and the European Central Bank. The Bank of England is expected to leave its interest rate unchanged at 0.50% as well as leave its QE total unchanged at 375 billion pounds. Any change in the accompanying statement by the Bank of England and its assessment of the economy, will be closely watched.
As far as the ECB is concerned, the consensus is calling for unchanged key interest rate of 0.50%. However, it will be interesting to see how the ECB will factor in the recent weak Eurozone numbers in its analysis, as demonstrated by downside surprises in inflation and unemployment the previous week.
The ECB – through its President Mario Draghi at the press conference after the meeting – could give some indications that it sees downside risks to the economy as more prevalent, which could be a hint for some additional monetary stimulus in the near future.
One idea that has already been floated by the ECB is that of an additional LTRO (Long Term Refinancing Operation), particularly since the early repayment dates of the previous 3-year LTROs are approaching and liquidity is being drained from the system.
Another possible tool would be to start preparing the ground for an interest rate cut of around 25 basis points from the present 0.50%. Therefore it will be a very interesting ECB meeting, and could have a major impact on the euro.
Also on Thursday, around the time the Draghi press conference is expected to begin, the advance estimate for US GDP for the third quarter will be released. Economists expect the US economy to have grown by an annualized 1.9% during the third quarter.
On Friday there is additional US data in the form of September personal income and spending as well as the Fed’s preferred inflation gauge, the core Personal Consumption Expenditure price index.
Last but certainly not least, nonfarm payrolls and the unemployment rate for October will be released. Mostly because of the effect of the government shutdown, economists expect a weak reading of 125 thousand jobs compared to September’s 148 thousand, while the unemployment rate is expected to edge up to 7.3% from 7.2.
The week finishes with preliminary Michigan consumer sentiment for November, expected to rise to 74.5 from its lowest point in the year at 73.2.
The current week is expected to feature many interesting events for market participants. This is particularly the case given the markets’ big focus on the monetary policy of developed countries’ central banks and the forward guidance they are issuing.
The week starts in more quiet fashion as on Monday, various manufacturing (PMI) and economic sentiment surveys are released in Europe.
Purchasing Managers’ Index surveys are important leading indicators for the economy and have shown to have strong predictive powers for economic growth.
On Tuesday, the most important indicator will be the US ISM non-manufacturing index for October, followed by UK retail sales and services PMI and the Chinese HSBC services PMI. Given the unexpected strength of the manufacturing ISM the previous week, it will be interesting to check whether services in the US are keeping pace.
Wednesday will feature the industrial and manufacturing output of the UK as well as the services PMIs out of the Eurozone. Eurozone retail sales for September will also be interesting to watch as the Eurozone consumer has had to cope with record high unemployment.
Thursday will feature the central bank meetings of both the UK and the European Central Bank. The Bank of England is expected to leave its interest rate unchanged at 0.50% as well as leave its QE total unchanged at 375 billion pounds. Any change in the accompanying statement by the Bank of England and its assessment of the economy, will be closely watched.
As far as the ECB is concerned, the consensus is calling for unchanged key interest rate of 0.50%. However, it will be interesting to see how the ECB will factor in the recent weak Eurozone numbers in its analysis, as demonstrated by downside surprises in inflation and unemployment the previous week.
The ECB – through its President Mario Draghi at the press conference after the meeting – could give some indications that it sees downside risks to the economy as more prevalent, which could be a hint for some additional monetary stimulus in the near future.
One idea that has already been floated by the ECB is that of an additional LTRO (Long Term Refinancing Operation), particularly since the early repayment dates of the previous 3-year LTROs are approaching and liquidity is being drained from the system.
Another possible tool would be to start preparing the ground for an interest rate cut of around 25 basis points from the present 0.50%. Therefore it will be a very interesting ECB meeting, and could have a major impact on the euro.
Also on Thursday, around the time the Draghi press conference is expected to begin, the advance estimate for US GDP for the third quarter will be released. Economists expect the US economy to have grown by an annualized 1.9% during the third quarter.
On Friday there is additional US data in the form of September personal income and spending as well as the Fed’s preferred inflation gauge, the core Personal Consumption Expenditure price index.
Last but certainly not least, nonfarm payrolls and the unemployment rate for October will be released. Mostly because of the effect of the government shutdown, economists expect a weak reading of 125 thousand jobs compared to September’s 148 thousand, while the unemployment rate is expected to edge up to 7.3% from 7.2.
The week finishes with preliminary Michigan consumer sentiment for November, expected to rise to 74.5 from its lowest point in the year at 73.2.
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