- Monday is all about inflation from the New Zealand’s economy
- Avalanche of important reports from the UK amid discussions about the future course of the BoE’s policy
- National Congress in China and GDP data on the spotlight later this week
This week is going to be crucial for the Antipodean currencies (AUD and NZD) which are bound to be more volatile on the back of the upcoming events. Moreover, the British pound might be exposed to larger moves as well as the labor market and inflation data could be conclusive in terms of the BoE’s meeting next month. Monday should be especially relevant for the NZ dollar which will get the inflation report, we provide a more in-depth insight below.
The past week brought some weakness in the US dollar. Although the Fed rate hike in December is almost a done deal, traders decided to book part of their profits, especially bearing in mind that the specifics of the tax-cut reform remain murky. Moreover, the stock markets rallied to new record highs. Nevertheless, bulls should stay cautious as aftermath of the National Congress of Communist Party of China could pose a risk to global sentiment.
NZ CPI report (Monday, 10:45 pm BST) – The NZ dollar has been in retreat of late due to broad-based recovery of the greenback and inconclusive outcomes of the election that caused a deterioration in the business sentiment. Moreover, the economic growth is moderate and the RBNZ has successfully dampened expectations for interest rate increases. However, a potential pickup in inflation may argue for tightening in monetary policy. The market consensus calls for rebound of CPI for the third quarter to 0.4% q/q from 0.0% q/q. Expect some moves on pairs like NZDUSD and AUDNZD.
The National Congress in China (Wednesday), GDP for the third quarter (Thursday, 3:00 am BST) and inflation data (Monday, 2:30 am BST) – The upcoming National Congress of the Communist Party of China is the key event this week, as according to some it may weigh on global sentiment for the remainder of the year. It only takes twice in a decade, thus any political and economic decisions made at the meeting will affect the Chinese and other markets for a long period of time. It’s likely that the Party will extend the tenure of President Xi Jinping, but first and foremost investors should focus on issues of excessive debt which poses a big risk to long term growth. If Chinese authorities scale down their stimulus package after Congress it could push down commodity prices, currencies such as AUD or NZD and stock markets e.g. US500 and DE30 (respectively S&P500 and DAX30 underlying). One should also watch for the release of inflation and GDP figures as they might spur higher volatility as well.
UK CPI figures (Tuesday, 9:30 am BST) and labour market report (Wednesday, 9:30 am BST) – The Pound has had a bumpy ride over the past week as outcomes of early Brexit talks were mixed. With the political issues in the limelight, the market should also pay attention to the state of the UK economy as the high inflation pressure pushed Bank of England to change its rhetoric which was the main driver for the currency back in September. Hence, the upcoming inflation report is of the highest importance concerning the possibility of the rate hike this year (CPI is expected to increase to 3.0% y/y). It’s also worth looking at the labour market. Having the unemployment rate close to multi-decade lows, the BoE wants to see boost in earnings growth which would also put pressure on tightening the monetary policy. Affected markets are likely to include GBP pairs and UK100 (FTSE100 underlying).