Drivers for the Week Ahead

Blog icons-DRIVERS

  • Politics dominate the agenda this week and in the run-up to the ECB meeting on October 26
  • Trump’s nomination of the next Federal Reserve Chair is expected any day
  • The 19th Chinese Communist Party Congress begins Wednesday
  • Japan goes to the polls on October 22
  • We warn that politics will be an important factor behind some divergences within EM FX

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Markets Looking for a New Focus

new bulbs

  • Spanish assets are rallying following Puigdemont’s attempt to square the circle yesterday by deferring the independence announcement
  • New revelations came from Japan’s Kobe Steel that its deception of its materials extends beyond copper and aluminum
  • The highlight from the US today will be the FOMC minutes from the September 20 meeting
  • MXN is the second worst performer in EM this week (behind TRY) on NAFTA concerns
  • Taiwan reported strong September trade overnight; Brazil August retail sales are expected to rise 4.4% y/y

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Dollar Pullback Extended

new shape

  • The momentum behind the “Party of Hope” has begun fading even as a new corporate scandal has exploded in Japan
  • The UK’s trade account continues to deteriorate
  • Catalonia’s President Puigdemont is slated to speak to the regional parliament early evening (early afternoon ET)
  • Russia Q2 current account is expected to move into deficit at -$2.8 bln; Chile reports September trade

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Drivers for the Week Ahead

Blog icons-DRIVERS

  • The US data highlight from the week ahead will be the CPI and retail sales report on October 13 
  • Spanish and UK politics are also impacting investors 
  • Polls suggest that the LDP will remain the largest party after the October 22 election 
  • EM FX ended the week under pressure, and that pressure persists as the new week begins 

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Consolidative Tone in FX Continues

new water

  • Europe’s PMI is the main economic data today 
  • The UK surprised with a better than expected service PMI reading 
  • US vehicle sales surged to an 18.57 mln unit pace in September, the highest in a dozen years 
  • Reserve Bank of India kept rates steady, as expected; National Bank of Poland is expected to keep rates steady at 1.5% 

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Dollar Retains Firm Tone, Spanish Markets Stabilize

new united states

  • Greater confidence of a December Fed hike is helping to support the greenback 
  • Disappointing UK PMIs weigh on sterling; back-to-back weekend political developments in Europe have helped take the shine off the euro 
  • The Reserve Bank of Australia’s meeting came and went without much fanfare 
  • Turkey September CPI rose 11.2% y/y; Chile August retail sales are expected to rise 5.5% y/y 

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Drivers for the Week Ahead

Blog icons-DRIVERS

  • We agree with the consensus that the markets are in a transition phase 
  • Weakness in the key US labor market report will be quickly shrugged off as adversely skewed by the record storms 
  • European and Japanese politics have erupted on the stage 
  • Brexit and Chinese dynamics are also changing; EM FX remains under pressure 

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