The week ahead features one key interest rate decision from the Reserve Bank of New Zealand and plenty of important macro data to look forward to for currency traders, which should provide pockets of elevated volatility – see the calendar highlights, below.
In addition to next week’s key data releases, we will be watching the equity markets closely. With the third quarter reporting season dying down, and the US markets hitting repeated new all-time highs in the face of declining earnings growth, the risks of a correction have been rising by each passing day. Admittedly, optimism over a US-China trade deal has been on the rise and this is what has helped to boost sentiment. But we think that investors will soon run out of reasons to justify buying stocks at these extremely elevated and overbought levels, without a decent pullback. Whether it is Trump, the Fed or trade representatives negotiating a deal, these headline-driven markets are almost entirely dependent on who says what at any given time, as we have witnessed this week. With positive headlines driving the markets upwards, a few negative headlines could undo the rally. So, a correction in the stock markets is a possibility, which means investors should, as always, take care of risk extremely carefully. A sharp retreat in equities, if seen, should help to boost the appeal of safe-haven gold and Japanese yen, among other things.
What’s more, crude oil has risen to a potential turning point in the face of rising US crude stockpiles and weakening demand outlook. The price of crude could retreat after the WTI contract reached the pivotal level of $57.50 this week. If oil turns lower, this could negatively impact oil-linked Canadian dollar and Norwegian Krona.
Here is what’s on the agenda next week:
- Japan Core Machinery Orders m/m
- UK GDP, manufacturing production and construction output
- US and Canadian banks will be closed in observance of Veterans Day/Remembrance Day
- UK Average Earnings Index 3m/y
- German ZEW Economic Sentiment
- RBNZ a 25-basis point cut to 0.75% expected, especially after this week’s weaker wages data.
- UK CPI
- Eurozone industrial production
- US CPI and Fed Chair Powell’s testimony
- Japan Prelim GDP, Australian employment report, and Chinese industrial production and retail sales
- German Prelim GDP, Eurozone GDP later
- UK Retail Sales m/m
- US PPI
- Eurozone trade figures
- US data dump includes retail sales, Industrial Production and Empire State Manufacturing Index.