The FX market could face more volatility this week as President Donald Trump and his Democratic challenger Joe Biden prepare to face off for the first time on Tuesday (Sep, 29) in Cleveland, Ohio. This will be the first of three presidential debates in the coming weeks. Generally speaking, many investors view a Trump win could raise fears over ramped up tensions between the U.S and China. At the same time, a Biden win is more likely to increase taxes. The economic calendar for this week is relatively busy with the main event being non-farm payrolls. Key figures coming up:
- On Tuesday (09/29): Wholesale Inventories (MoM); American Petroleum Institute Weekly Crude Oil Stock; Conference Board Consumer Confidence.
- On Wednesday (09/30): ADP Nonfarm Employment Change (Sep); GDP annualized (QoQ); GDP price index.
- On Thursday (10/01): Initial Jobless Claims; Core Personal Consumption Expenditure Price Index; Manufacturing PMI (Markit); Manufacturing PMI (ISM);
- On Friday (10/02): Unemployment rate (Sep); Factory Orders (MoM);
The short-term prospect in the U.S. is uncertain, as we see an increasing number of Covid-19 cases sparking concerns across the world. On Wednesday, ADP will publish the September employment data, these numbers will provide an important gauge of the American economy’s performance over the month.
The growing uncertainty around the resurgence of Covid-19 cases is negatively affecting an already fragile economic recovery. This week, the focus will be on Friday’s Eurozone inflation figures for September, where the headline and core readings are expected to be mildly negative and mildly positive respectively. Also, the jobless rate is seen at a two-year high in August. Key figures coming up:
- On Tuesday (09/29): Eurozone Consumer Confidence; Germany Consumer Price Index.
- On Wednesday (09/30): Germany Retail Sales and Unemployment Rate (Aug).
- On Thursday (10/01): Eurozone Manufacturing PMI (final); Unemployment rate.
- On Friday (10/02): Eurozone Consumer Price Index (Sep).
Today, European Center Bank (ECB) President Christine Lagarde is due to take part in a European Parliament hearing, and then on Wednesday “The ECB and its Watchers” conference will take place. Both talks could bring clues on a possible extension of the pandemic bond-buying program. Other key data include the Eurozone business survey; France consumer confidence and inflation; Italy and Spain Markit Manufacturing PMI surveys. These figures will give the clearest representation yet of how the Eurozone economy has performed amid the Covid-19 pandemic during last month. Therefore, any weak numbers would test the EUR’s strength.
The 9th and last official round of Brexit talks will begin on Tuesday (28/09) in Brussels, with both sides, UK and EU, warning that time is running out on agreeing to a comprehensive free trade agreement (FTA). The market remains cautious over the steps that need to be taken on both sides to get a deal done. The risk has always been that Britain could pull out of talks, therefore the final-stage negotiations may add pressure on the Pound. Investors will be closely watching the UK Q2 GDP growth, which will be published on Wednesday by the Bank of England. At the same time, Markit Manufacturing PMI, alongside the current account, and the Nationwide house price index will be released. Key figures coming up:
- On Wednesday (09/30): Q2 GDP (final); Nationwide House Price Index (Sep); Current Account (Q2).
Japan’s quarterly Tankan diffusion indices that measure overall business conditions will be updated with Q3 readings on Wednesday. It is expected that the Bank of Japan’s survey will show strong improvements, highlighting a gradual resumption of economic activity. Moreover, the Tankan’s sentiment indexes are derived by subtracting the number of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists. Key figures coming up:
- On Tuesday (09/29) Retail sales (Aug).
- On Thursday (10/01): Q3 Tankan Index; Jobs/Application Ratio (Aug); Unemployment Rate (Aug).
- On Friday (10/02): Household Confidence (Sep).
In Canada, Wednesday’s GDP data for July should continue to point to decent progress. Previously, the country’s economy grew 6.5% over June, quickening from an upwardly revised 4.8% expansion. For July, the market expectation is around +3%, which is different from what was observed last month but will still represent another important step forward in the economic rebound. Key figures coming up:
- On Tuesday (09/29): Product Price Index (Aug).
- On Wednesday (09/30): GDP (Jul); Budget Balance.
- On Thursday (10/01): RBC Manufacturing PMI (Sep).
Last week we saw the MXN hit a seven-week high on Thursday as investors culminated a week dominated by global risk aversion. Also last week, Mexico's Central Bank delivered its 11th straight cut this year and left the door open for further cuts to combat a faltering economy. The market’s consensus is another one or two 25 bps cuts in the coming months, taking the rate closer to 3.5%. Even with the new cuts expected, the Mexican benchmark rate is still more attractive than its Latin neighbors, which means that the MXN is still supported by those looking for above-average returns. There is a busy week ahead for Mexico’s economic calendar. Key figures coming up:
- On Monday (09/28): Unemployment Rate (Aug).
- On Wednesday (09/30): Fiscal Balance PMI (Sep).
- On Thursday (10/01): Manufacturing PMI (Sep).
The CNY has strengthened against the USD more than 3% this quarter, beating all of its Asian peers. On Sunday, the National Bureau of Statistics (NBS) showed that profits of China’s major industrial firms maintained steady recovery in August as the production and operations of enterprises further improved. The growth was 0.5% from July, illustrating that supply and demand gradually improved over the last month. The market participants will keep a close eye on September's Manufacturing PMI update from both the NBS and Caixin, with forecasts pointing to the ongoing recovery in activity from the Covid-19 shock. China will be shut for a week-long holiday starting Thursday. Key figures coming up:
- On Wednesday (09/30): NBS Manufacturing PMI (Sep); NBS Non-Manufacturing (Sep); Caixin Manufacturing PMI (Sep).
- On Thursday (10/01): Caixin Services PMI (Sep); Caixin Composite PMI (Sep); Foreign Exchange Reserves (Sep).
- On Thursday (10/01): Holiday – Mid-Autumn Festival.
- On Friday (10/02): Holiday – National Day.
Last week, the BRL decreased against the USD by 3.32%, year to date, it has weakened approximately 38.58%. Although a faster than expected economic recovery is underway, as pointed out by the Central Bank of Brazil, the path for the basic interest rate to remain at historical lows remains in effect. The country’s primary budget balance figures, expected on Wednesday, will probably bring another month deep in the red. A positive reading of August industrial production data on Friday could help boost optimism for growth. Key figures coming up:
- On Tuesday (09/29): Producer Price Index (MoM).
- On Wednesday (09/30): Unemployment Rate (Aug); Budget Balance (Aug).
- On Thursday (10/01): Markit Manufacturing PMI (Sep).
- On Friday (10/02): Industrial Production (MoM).