Renewed demand concerns weighed heavily on equities and, to a lesser degree, crude oil prices, while the euro and Canadian dollars nosedived in what has been a very volatile week, as investors responded to generally disappointing macro data and dovish assessments of the global economy by major central banks. The Dollar Index touched its 2018 high as the ECB shot down the euro and the BOC triggered a sell-off in Canadian dollar, while the pound continued to trade lower ahead of next week’s second Brexit ‘meaningful vote’ in UK parliament. On Friday, though, the dollar eased back against some of her major rivals after the latest US jobs report revealed a headline employment figure that was much lower than expected, though the downside was limited wages rose at a faster clip.
Look ahead: Brexit vote, Chinese data and BOJ
Next week promises to be slightly quieter in terms of major data releases, but given this week’s big moves in the markets, expect to see some aftershocks here and there. That being said, Brexit is likely to dominate the agenda again, so the pound could prove to be quite volatile, providing plenty of tradable opportunities.
Theresa May said she has put forward "serious" proposals to resolve the deadlock over the Irish backstop, but at time of writing, on Friday afternoon, it was not clear whether any real progress was made by Britain and the European Union in reaching an accord on how the former can exit as painlessly as possible. MPs will vote for a second time on the withdrawal deal the UK Prime Minister has negotiated with the EU on Tuesday. If MPs reject the deal again, then the next step would be to either leave the bloc without a deal or delay the exit date. The real question is, will we be any clearer about the direction Brexit is heading by next week with time fast running out?
Before we look at next week’s data highlights, below, please note that China’s CPI is due for publication on Saturday, the same day when the Fed’s Chairman, Jay Powell, is due to speak about monetary policy normalization in California. So, there is potential for the markets to gap at the Asian open on Sunday night. Also, Sunday will see North America shift to summer time, which means that London will only be 4 hours behind New York for the next three weeks.
- Monday: German industrial production and US retail sales.
- Tuesday: UK GDP, manufacturing production and parliamentary vote on Brexit; US CPI
- Wednesday: UK budget and US durable goods orders and construction spending
- Thursday: China industrial production, retail sales and fixed asset investment
- Friday: BOJ policy decision; Canadian manufacturing sales, and US data dump which includes industrial production, UoM consumer sentiment and JOLTS job openings
Overall, next week’s data releases are not significantly important in the grand scheme of things, but we will still have a handful of potentially market-moving numbers to look forward to. It is also difficult to see how the Bank of Japan (Friday) will get any more dovish but will do its best to keep the yen under pressure given the recent moves by other major central banks. Perhaps the biggest fundamental event next week is the next “meaningful vote” in UK parliament. So, the pound, at least, should move sharply.