The Week Ahead: The week that could likely go down as the most pivotal in a decade is finally upon us with the US Presidential Election to take place on Tuesday (US time). Economic data and announcements will be lost in the white noise of the US election – with this in mind there may not be a better opportunity for governments and economic agencies around the globe to release any less than favourable data than this week. Currency markets are likely to remain volatile with the election outcome seemingly on a knife-edge. By midweek the most divisive campaign in many Presidential cycles will finally be over and the US population will have made their choice.
With the noise of the US election leadup last week it is easy to overlook that the US Federal Reserve kept interest rates on hold and that there was a strong increase in US jobs (161k in October) even if it did fall short of analysts expectations. Unemployment in the US came in at 4.9%. This positive jobs data could serve to provide the Fed with the impetus needed to raise rates in December however the inflation figures remain stubbornly below the Fed’s target of 2%. There were two votes recorded against the decision to maintain the status quo – these were from two of the three dissenters at the September meeting.
The AUD performed strongly against the USD last week and has opened this week at 0.7674 versus the greenback. The AUD was spurred on by the RBA decision to keep interest rates on hold before taking advantage of the softening USD in late trade. The USD was close to one-month lows as the election outcome hovers ominously. Business confidence and consumer sentiment figures will be released in Australia this week alongside inflation expectations data. As noted above the data will likely fade in significance this week with the US election therefore adding further interest to RBA Assistant Governor Debelle’s speech on Friday.
The NZD has surged strongly against the AUD and the USD in recent days however this could be a short lived run with the RBNZ largely expected to cut interest rates on Thursday. This expected rate cut does appear however to have been factored in to the NZD with any deviation from the expected cut likely to trigger a more volatile reaction. With inflation starting to turn back towards the RBNZ target band it is possible that this could be the last cut in the current interest rate cycle with an additional move in February considered unlikely. There is, however, the small matter of the US election that could still serve to throw markets into a state of flux.
The GBP staged a comeback of sorts last week following the High Court decision that the triggering of the Brexit, Article 50, can’t be done without a parliamentary vote. This has given some hope to the Remain faction that all may not yet be lost. Only time will tell and what is certain is that this is not the last to be heard of how the Brexit will be enacted. The UK GDP estimate is due out midweek and retail sales data will also be released.
Europe will also be hanging on the US election result with bated breath. Weak inflation remains a continuing headache for the euro zone and a modest GDP rise can only exciter so much. The ECOFIN and Eurogroup meetings are scheduled for this week alongside a slew of German economic data and EU Economic forecasts.
In Asia this week Chinese trade data , CPI and PPI dominates. The Bank of Japan Monetary Policy Meeting Minutes will be released on Monday and Summary of Opinions on Thursday. This will be interspersed with Average Cash Earnings, Leading Indicators, machinery orders and current account figures.
So, all in all this week despite the global data and other happenings the only show in town is the US Presidential Election. Only time will tell which way the result falls in what has been one of the most confronting Presidential Election campaigns in living memory.