Trade and politics set to dominate
Trade developments will remain a key market influence during the week as the US and China attempt to finalise the phase-one trade deal this month.
There will still be a high degree of uncertainty, especially with clear evidence of divisions within the Administration.
Although markets have priced in a deal within the next 3-4 weeks, any move to cut exiting tariffs would help support risk appetite. In contrast, a collapse in talks would trigger sharp gains for the yen and Swiss franc.
President Trump will inevitably be a key focus with the House of Representatives set to hold public hearings on the impeachment case against Trump.
CPI inflation data is due on Wednesday with the retail sales release on Friday. The inflation data will need to be much weaker than expected to trigger fresh speculation over a further Fed rate cut in December.
Business confidence data will be monitored with the New York Empire survey on Friday.
Federal Reserve commentary will continue to be watched closely. The main focus will be on comments from Chair Powell with his testimony to the Joint Economic Committee due on Wednesday and House Budget Committee on Thursday.
Powell is unlikely to reiterate that the Fed will monitor incoming data releases and avoid giving guidance on interest rates, but his remarks will still be watched very closely.
The latest GDP data will be released on Monday, together with the industrial production release. GDP declined for the second quarter and any third-quarter contraction would put the UK in technical recession.
The latest labour-market data is due on Tuesday with CPI inflation data Wednesday. Retail sales data is scheduled for Thursday, although the data overall will need to be substantially away from market expectations to trigger notable Sterling moves.
Political developments will continue to be monitored closely as the General Election campaign continues. Sterling will tend to lose ground if the opposition parties appear to be gaining ground.
The latest German ZEW investor confidence index is due on Tuesday and the flash GDP reading on Thursday. Economic data is unlikely to have a major Euro impact during the week.
The Reserve Bank of New Zealand will announce its latest monetary policy decision on Wednesday local time with speculation that the bank will cut rates to 0.75%. Forward guidance from the bank will also be important for sentiment with the currency rallying if there is no cut or the bank signals that further reductions are unlikely.
Australian employment data is due on Thursday with US-China trade developments also crucial for Australian dollar sentiment
The latest Chinese industrial production and retail sales data are due on Thursday. Weak data would trigger fresh alarm over the domestic and global economy.
Currency FX Forecast for Next Week
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