Major currency markets were little-moved in the past week, due in part to a relative dearth of scheduled macroeconomic events. While there were key central bank decisions from both the Reserve Bank of Australia and Reserve Bank of New Zealand, neither made any rate or policy changes, in-line with market expectations, nor did either of the two central banks make any major revelations or depart significantly from their usual stances.
Aside from those two central bank decisions, the US dollar continued to trade within a relatively tight range. It came under pressure in the latter half of the week, however, as concerns surrounding US fiscal policy, most notably tax reform, have increased. The introduction in the previous week of a new tax plan by the US House of Representatives helped give the dollar a temporary boost. During this past week, however, doubts regarding the nature and timeline of tax reform began to arise once again as the Senate introduced its own tax bill that diverged considerably from the House plan. Among other differences, senators argued for pushing major corporate tax cuts to 2019 instead of the House’s 2018 timeline. The specter of tax reform delay has tentatively weighed on both the US dollar and equity markets.
Moving forward into the week ahead, US tax reform will continue to be a major market variable, especially with respect to US equities and the US dollar. Aside from fiscal policy, the week also features critical inflation data from the UK, US, euro area, and Canada, as well as key jobs data from the UK and Australia. From the UK, the year-over-year CPI inflation reading will be released on Tuesday, followed by the UK jobs report on Wednesday and retail sales on Thursday. From the US, PPI and CPI inflation data will be released on Tuesday and Wednesday, respectively, while US retail sales data also comes out on Wednesday. The euro area reports quarterly GDP on Tuesday and annual CPI on Thursday. Finally, Canada’s CPI will be released on Friday.
Here are some of the key events scheduled:
· Tuesday, November 14:
o China Industrial Production (Y/Y)
o UK Consumer Price Index (Y/Y)
o Euro Area Flash Gross Domestic Product (Q/Q)
o German ZEW Economic Sentiment
o US Producer Price Index (M/M)
· Wednesday, November 15:
o Japan Preliminary Gross Domestic Product (Q/Q)
o UK Average Earnings Index, Unemployment Rate, and Jobless Claims
o US Consumer Price Index (M/M) and Retail Sales (M/M)
· Thursday, November 16:
o Australia Employment Change and Unemployment Rate
o UK Retail Sales (M/M)
o Euro Area Final Consumer Price Index (Y/Y)
o US Weekly Unemployment Claims
o US Industrial Production (M/M)
· Friday, November 17:
o Canada Consumer Price Index (M/M)
o US Building Permits and Housing Starts