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The following article is based on research by Marshall Gittler, Head of Investment Research for FXPRIMUS.
FXPRIMUS Week in Focus for the week beginning 10 Oct
It’s going to be a quiet week as regards indicators, as usual for the second week of the month. The start is likely to be particularly quiet owing to the vacation today in Japan, the US and Canada.
The market’s view on the second US presidential debate is Hillary Clinton won it. But as you can see from this graph, it wasn’t as much of a risk-on event as the previous debate. The MXN gained, which shows that the market thinks Trump has less chance of winning. But gold also gained. That didn’t happen after the first debate. And looking at stock markets in Asia and Europe, there seems to be no great follow-through in risk assets. So it could be that the US presidential race is no longer much of a factor in the FX market.
For the US, the impact of Friday’s disappointing nonfarm payrolls is likely to fade over the week, in my view. That seems to be the case recently as investors reassess their first reaction to the data.
The Job Openings and Labor Turnover Survey (JOLTS) report on Wednesday will tell us how many job openings there are. The number is expected to fall slightly, which would also explain slowing growth in payrolls as the US economy approaches full employment.
Wednesday also sees the release of the minutes from the latest FOMC meeting, when once again the Committee refrained from hiking rates. The minutes may reveal why the doves won and how likely they are to change their mind. That could also support the dollar. And then on Friday, Chair Yellen will speak on “Macroeconomic Research After the Crisis,” which may give us some insights into her thinking.
Friday is the biggest day for US indicators, when retail sales, PPI, and U of Michigan consumer survey will be released. Retail sales is the most important figure. Sales are expected to accelerate, which could help USD. An improvement in consumer sentiment might add to the good tone at the end of the week – depending of course on what Yellen has to say.
For Europe, the ZEW survey on Tuesday and EU-wide industrial production on Wednesday will be the features. The ZEW survey is forecast to be little changed and should therefore not give much impetus to trading.
The week should also bring some encouraging reports from China. Monetary data – new loans and money supply growth – are due out sometime during the week, while inflation data will be released on Friday. Both lending and money supply are expected to accelerate, while consumer prices are forecast to rise as well. That should be good news for risk-sensitive assets and support stocks and the commodity currencies. Whether it will be enough to support CNH, which has been weakening recently, is another matter.
Meanwhile, the pound may get some respite – there are no major UK indicators out during the week.