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U.S. President Donald Trump’s health and fiscal stimulus package

USD

The focus is likely to be on a new U.S fiscal stimulus package after Trump issued a call for negotiators to “work together” and complete a deal on it, as well as the President’s health condition and prognosis after contracting Covid-19 late last week. Also last week, the market was supported by signs that a stimulus package is still possible after the House passed a $2.2 trillion Democratic fiscal stimulus package on Thursday night (but failed to reach an agreement with Republicans on the plans). On Sunday morning, House Speaker Nancy Pelosi said she was “making progress” in the aid package talks, but she declined to say if an agreement was any closer than it had been last week. Moreover, throughout the week Fed Chairman Jerome Powell is also expected to push for the stimulus package to boost the economy and ensure the recovery does not stall. The economic calendar for this week is relatively busy. Key figures coming up:

  • On Monday (05/10): Markit Services and Composite PMI (Sep) (final) | ISM Non-Manufacturing Composite (Sep) | Chicago Fed President Charles Evans
  • On Tuesday (06/10): Trade Balance (US$ bn) (Aug) | Job Openings and Labor Turnover Survey (JOLTS) Job Openings
  • On Wednesday (07/10): US EIA crude inventories (w/e 2 October) | FOMC minutes (15-16 Sep)
  • On Thursday (08/10): US initial jobless claims (3-Oct)
  • On Friday (09/10): Wholesale trade

EUR

There is growing uncertainty around the resurgence of Covid-19 infections and its impact on economic activity. There are strict new measures being implemented in several countries’ capitals across Europe, which could catalyze global market risk over the coming week. In the eurozone, HICP inflation dropped to -0.3% y/y in September, it remains to be seen how long the Europe Central Bank (ECB) can absorb lackluster inflation readings without taking further steps. Thus, this week, the focus will be on ECB meetings on Thursday, where market participants will see whether the ECB will make further improvements on monetary policy to address the lower inflation or not. Economic indicators will also drive the market’s attention to Germany data throughout the week. Key figures coming up:

  • On Monday (05/10): Eurozone Markit Services and Composite PMI (Sep) (final)
  • On Tuesday (06/10): Factory Orders (Aug) for Germany, Italy, France and Spain
  • On Wednesday (07/10): Industrial Production (Aug) for Germany and Spain
  • On Thursday (08/10): Trade Balance (€ bn) (Aug) for Germany
  • On Friday (09/10): Industrial Production (Aug) for Italy and France

GBP

UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen held a video call on Saturday afternoon to discuss the progress in the negotiations from last week. As expected, the outcome of their call was that Brexit negotiators will be given more time to reach a deal during trade talks. Fishing rights, state aid, and governance continue to be thorny issues between the two sides as they look to ratify a new trading relationship before the transition period ends on December 31. Key figures coming up:

  • On Monday (05/10): Official Reserves Changes (US$ bn) (Sep) | Markit Services and Composite PMI (Sep) (final)
  • On Tuesday (06 10): IHS Markit Construction PMI (Sep)
  • On Thursday (08/10): BoE FPC statement
  • On Friday (09/10): Visible Trade Balance (£ mn) | Industrial output (Aug)  

The market remains cautious over the steps that need to be taken on both sides to get a deal done and this deadlock is likely to weigh on the GBP.

JPY

Over the week, market participants will be looking for clues as to the strength of the Japanese economic recoveries via services PMIs. Early this morning, the recently published Jibun Bank Japan Services Purchasing Managers’ Index (PMI) showed Japan's September service sector activity shrank at the slowest pace since the pandemic's start. The Index rose to its highest in eight months, coming in at a seasonally adjusted 46.9 from 45.0 in the previous month. The recent figure shows there is a sign of improvement in the service sector, however, investors will wait for more pieces of evidence in the coming days. Key figures coming up:

  • On Monday (05/10): BoJ Kuroda Speech at Japan Securities Conference |
  • On Thursday (08/10): Current account balance (Aug) | Trade balance basis (Aug)
  • On Friday (09/10): Labor cash earnings (Aug) | Real cash (Aug) | Household spending (Aug)

CAD

Investors will be closely watching the Bank of Canada governor Tiff Macklem’s scheduled appearance on Thursday and the jobs report for September is due on Friday. The country has recovered almost two-thirds of the 3 million jobs lost since the pandemic’s start. However, recovering the rest will not be easy for the Canadian economy, which has been watching the second Covid-19 wave cases increase steadily across the country. The currency market will also keep a close eye on international merchandise trade numbers for August on Tuesday. Canada’s imports and exports both posted gains in July, but still remained below their pre-pandemic levels. Key figures coming up:

  • On Tuesday (06/10): Merchandise Trade Balance (C$ bn) (Aug)
  • On Thursday (08/10): Bank of Canada governor Tiff Macklem is scheduled to give a speech to the Global Risk Institute
  • On Friday (09/10): Unemployment rate (Sep)

MXN

Last week we saw the MXN reaching the highest level since September as the USD was losing value in the global market. The Mexican peso led emerging market currencies with a 3.3% rise against the greenback. The week will start with market participants watching the Consumer Confident report, which may show the fourth month of improvement. The market’s attention will turn to one of the most important industry reports, the Vehicle Production Report on Tuesday, which will indicate how fast the country is recovering from the lockdown. Mexico’s central bank is scheduled to release on Thursday, the minutes from its most recent monetary policy decision (Sep, 24), where it unanimously moved to cut the target rate by -25 bps to 4.25%. Key figures coming up:

  • On Monday (05/10): Consumer Confidence (Sep)
  • On Tuesday (06/10): Vehicle Production and Exports (Sep)
  • On Thursday (08/10): Central Bank Monetary Policy Minutes | Consumer Price Index (CPI) (Sep)

CNY

In China, the markets are still shut for its Golden Week holidays until Thursday. China’s Ministry of Culture and Tourism said on Sunday that 425 million Chinese left their homes to travel across the country from Thursday to Sunday, the first four days of the eight-day national holiday - a fall from 542 million in the same period last year. This drop means 31% less in tourism revenue. The resumption of economic activity in China will take place on Friday after the Golden Week holiday. Key figures coming up:

  • On Tuesday (06/10): Exports and Imports (goods and services) data (Sep)
  • On Wednesday (07/10): Caixin Services (Sep)
  • On Thursday (08/10): Central Bank Monetary Policy Minutes | Consumer Price Index (CPI) (Sep)
  • On Friday (09/10): IHS Markit Asia Sector PMI (Sep)

BRL

In Brazil, after months of depressing numbers, a new Covid-19 trend has started to improve in recent weeks, which could feed positive sentiment for investing in the region. According to the newspaper O Estado de S. Paulo, the average number of new daily Covid-19 deaths in the city of São Paulo has decreased by 82% between August and September. Furthermore, the newspaper showed that 79 of the city’s 96 districts have seen a deceleration of death rates. Last week, the BRL decreased against the USD by 2.02% and reached its highest level since May. An eye will be kept on the new minimum income program “Renda Cidadã” developments, which has been testing the Economic Minister, Paulo Guedes’, influence on the federal government. Key figures coming up:

  • On Monday (05/10): Markit Services and Composite PMI (Sep)
  • On Tuesday (06/10): Vehicle Production and Exports Anfavea (Associação Nacional dos Fabricantes de Veículos Automotores) (Sep)
  • On Thursday (08/10): Retail Sales (Aug)
  • On Friday (09/10): IBGE Inflation IPCA (Sep)

Quick Insights

USD: U.S fiscal stimulus package after Trump issued a call for negotiators to “work together”

USD: U.S fiscal stimulus package after Trump issued a call for negotiators to “work together”

EUR: Focus will be on the Europe Central Bank meeting on Thursday

EUR: Focus will be on the Europe Central Bank meeting on Thursday

GBP: Fishing rights, state aid, and governance continue to be thorny issues

GBP: Fishing rights, state aid, and governance continue to be thorny issues

JPY: Japan's September service sector activity shrank at the slowest pace since the pandemic's start

JPY: Japan's September service sector activity shrank at the slowest pace since the pandemic's start

CAD: Bank of Canada governor Tiff Macklem’s scheduled appearance on Thursday

CAD: Bank of Canada governor Tiff Macklem’s scheduled appearance on Thursday

MXN: Vehicle Production Report on Tuesday

MXN: Vehicle Production Report on Tuesday

CNY: The markets will remain shut for its Golden Week holidays till Thursday

CNY: The markets will remain shut for its Golden Week holidays till Thursday

BRL: The number of new daily Covid-19 deaths in the city of São Paulo has decreased by 82%

BRL: The number of new daily Covid-19 deaths in the city of São Paulo has decreased by 82%

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