The U.S. dollar registered some smart gains following the Fed decision, but could not sustain it for long. The Federal Reserve said that it would start reducing its balance sheet, as was expected by the market and intends to raise the interest rates in December. Further, the Fed noted that it plans to hike interest rates three times next year. This caught the markets a little bit off guard, but the dollar rallied. Yellen and other policymakers opined that low inflation rate is a “mystery”, but it is rising for the time being. However, doubts over the possibility of the Fed hiking interest rates eventually restricted the dollar’s advance. In the U.K., the pound lost ground following May’s speech but continues to look strong because of the prospects of a rate increase. The on-going difference of opinion as regards North Korea contributed to a dip in USD/JPY, but it was very limited.
The key events scheduled for the coming week include the German elections, GDP data from several countries, and durable goods orders as the third quarter is about to close. Here is an outlook on the upcoming week’s releases:
#1: New Zealand Parliamentary Elections (09/23/2017 Saturday)
In New Zealand, it was initially expected that the ruling National Party would come back to power without any hitches. This is because PM Bill English was handling the finance portfolio for the most part of the party’s current reign for as many as nine years and the economy has been doing well. However, a change in leadership in the opposition party, the Labour Party, is likely to make it a closely fought election. Jacinda Arern, who is very young and energetic, is leading in certain areas and has driven the kiwi lower. This indicates that the markets prefer the National Party, which is very market friendly, and expect the ruling party to continue in power. If the National Party registers a win, the NZD will post some handsome gains. On the other hand, a win for Labour Party is likely to drive the currency lower. The indications are that anything is possible.
#2: German Federal Elections (09/24/2017 Sunday)
All the polls point towards an easy win for Chancellor Angela Merkel. If she wins, this will be her fourth term in power. However, this would probably be her last term of leading the center-right CDU party. Germany’s economy has been doing well and she enjoys a good international standing. The opposition center-left SPD party leader Martin Schulz is way behind in the polls. Both the leaders are pro-European and they have both lambasted the U.S. President Donald Trump. The differences between the parties are small, but the markets prefer the former. If Schulz registers a surprise win, the euro could see some downside. The question that remains to be answered now is whether Merkel would repeat the grand coalition with the opposition party. Or, would she establish a coalition with the FDP, which is very business friendly and is all set to make a comeback to the parliament? In general, the markets would want the FDP to be a part of the coalition. In Germany, coalition negotiations consume a great deal of time. Therefore, an immediate action in this regard is highly unlikely. Overall, Merkel’s victory would be positive for both markets and the euro. However, this is most likely factored in already. Results are likely to be out prior to the market opening in Asia.
#3: Bank of Japan Governor Kuroda Speaks (09/25/2017 Monday 5:35 GMT)
Governor of the Japanese central bank Haruhiko Kuroda is scheduled to speak at the business leaders’ meeting in Osaka. It is expected that he will respond to questions from the audience. Markets often remain volatile during his speeches. This is because traders make an attempt to understand as to what direction interest rates will take.
#4: European Central Bank President Draghi Speaks (09/25/2017 Monday 13:00 GMT)
In Brussels, Mario Draghi, President of the European Central Bank (ECB), is scheduled to testify before the Economic and Monetary Affairs Committee of the European Parliament on economic and monetary developments. Market volatility can be expected during his speeches as traders try to decipher clues on the direction of interest rates.
#5: U.S. CB Consumer Confidence (09/26/2017 Tuesday 14:00 GMT)
In the U.S., the confidence of the consumers in the economy strengthened against expectations in August to the strongest level in as many as five months. Consumers were also optimistic about the current business conditions. According to the Conference Board, the Consumer Confidence Index rose to the 122.9 level in August after the reading for the prior month was revised downward to the 120.0 level from the 121.1 level. Analysts had expected the reading to come in at 120.3. Forecast for September: 119.6
#6: Fed Chair Janet Yellen Speaks (09/26/2017 Tuesday 16:45 GMT)
Fed Chair Janet Yellen is scheduled to speak about inflation and monetary policy in Cleveland at the Annual Meeting of the National Association for Business Economics. Questions for the audience are expected. Markets often remain volatile during her speeches as traders look for clues on the direction of interest rates.
#7: U.S. Durable Goods Orders (09/27/2017 Wednesday 12:30 GMT)
New orders for durable goods manufactured in the U.S. fell 6.8 percent on a month-over-month basis in July after the reading for the prior month was revised downward to an increase of 6.4 percent, the highest increase in nearly three years. Analysts had expected the orders for durable goods to fall by 6.0 percent. Orders for non-defense capital goods, which exclude aircraft, are seen as an indicator of business spending plans. Core durable goods orders rose by 0.4 percent, following the flat reading recorded in June. Core durable goods orders have not declined since December last year. Forecast for August: 1.1 percent and 0.2 percent increase in durable goods and core durable goods orders
#8: U.S. Crude Oil Stocks Change (09/27/2017 Wednesday 14:30 GMT)
In the U.S., crude oil stocks rose by 4.591 million barrels during the week that ended on September 15 after crude inventories increased by 5.888 million barrels, the biggest rise in six months, during the previous week. Analysts had expected the crude oil stocks to increase by 3.493 million barrels. Gasoline stocks, on the other hand, declined by 2.125 million barrels after the record 8.428 million barrels slump registered in the prior week. Suppliers took out from their storage tanks to replace the loss incurred because of Hurricane Harvey.
#9: Bank of Canada Governor Stephen Poloz Speaks (09/27/2017 Wednesday 15:45 GMT)
Stephen Poloz, Governor of the Bank of Canada, is scheduled to speak at the luncheon meeting of St. John’s Board of Trade in Newfoundland. The text of his speech will be released 15 minutes later. Market volatility can be expected during his speech. Traders will be on the lookout for clues on interest rate decision.
#10: Bank of Canada Governor Stephen Poloz Speaks (09/27/2017 Wednesday 17:55 GMT)
Stephen Poloz, Governor of the Bank of Canada, is scheduled to hold a press conference after his speech at the luncheon meeting of St. John’s Board of Trade in Newfoundland. Market volatility can be expected during this period as traders will be on the lookout for clues on interest rate decision.
#11: New Zealand Official Cash Rate (09/27/2017 Thursday 20:00 GMT)
The Reserve Bank of New Zealand decided to leave the official cash rate steady at the record low of 1.75 percent during the meeting held on the 9th of August, as was widely expected by the market. New Zealand’s central bank changed the interest rate for the last time in November last year. Policymakers said that major challenges continue to remain because of extensive political uncertainty and persistent surplus capacity. In addition, they said that softer GDP growth in the previous quarter was below expectation although it is likely to improve in due course. Moreover, the central bank noted that monetary policy will continue to be accommodative for a significant period of time. Forecast for September: 1.75 percent
#12: Reserve Bank of New Zealand Rate Statement (09/27/2017 Thursday 20:00 GMT)
The Reserve Bank of New Zealand uses the rate statement as a tool to communicate with the investor community as regards the monetary policy. The statement provides the outcome of the decision of the members of the monetary policy committee on setting the interest rates. It also consists of a commentary on the economic conditions based on which they arrived at the decision. More importantly, the rate statement provides an economic outlook and offers clues on future interest rate decisions.
#13: Bank of Japan Governor Kuroda Speaks (09/28/2017 Thursday 6:35 GMT)
Haruhiko Kuroda, Governor of the Japanese Central Bank, is scheduled to speak in Tokyo at the National Securities Industry Convention. Market volatility can be expected during his speeches. This is because traders make an attempt to understand the direction of interest rates in the future.
#14: Bank of England Governor Carney Speaks (09/28/2017 Thursday 8:15 GMT)
Mark Carney, Governor of the Bank of England is scheduled to deliver the opening remark in London at the Bank of England’s Independence 20 Years On Conference. Volatility can be expected during his speeches as traders make an attempt to decipher clues on interest rate decision.
#15: U.S. Final GDP Data (09/28/2017 Thursday 12:30 GMT)
The second estimate of the second quarter GDP showed upbeat results. According to the report, the US GDP touched the magical 3.0 percent, which was significantly above the preliminary estimate of 2.6 percent. This provided a great deal of relief as the growth rate was poor for the whole of last year and in the first quarter of this year. The market had expected a GDP growth of 2.7 percent. The growth figure for this year’s second quarter is the strongest since the 2015 first quarter. GDP growth in the second quarter was revised upward because of the increases in non-residential fixed investment and personal consumption expenditures. In the final estimate, it is expected that the GDP growth rate will be raised slightly to 3.1 percent.
#16: U.S. Unemployment Claims (09/28/2017 Thursday 12:30 GMT)
The number of American people filing for jobless benefits fell unexpectedly by 23,000 from the previous period to 259,000 during the week that ended on September 16, well below analysts’ expectation that 300,000 claims will be filed. The four-week moving average, which eliminates weekly volatility, rose by 6,000 to the highest level of 268,750 claims since June last year. Hurricanes Harvey and Irma significantly impacted the claims data, especially for Florida and Texas. Forecast for the next period: 269,000
#17: U.K. Current Account (09/29/2017 Friday 8:30 GMT)
U.K.’s current account deficit for the first quarter of this year rose to GBP 16.9 billion from GBP 12.1 billion for the previous quarter. The market had expected a deficit of GBP 17.3 billion. The goods deficit increased to GBP 34.3 billion because of an increase in the import of finished manufactured goods, transport equipment, machinery, oil, and semi-manufactured goods. Additionally, the services surplus narrowed to GBP 25.4 billion, driven by a fall in insurance and pension services and the export of business services and an increase in the import of other business services. The primary income deficit also widened to GBP 2.7 billion. Forecast for the second quarter: a deficit of GBP 15.8 billion
#18: Canada GDP (09/29/2017 Friday 12:30 GMT)
Canada’s economy grew 1.1 percent on a quarter-on-quarter basis in the second quarter of this year after recording a growth of 0.9 percent in the previous quarter. This is the highest growth rate ever since the third quarter of 2011. The growth was boosted by the export of goods and household consumption.
#19: European Central Bank President Draghi Speaks (09/29/2017 Friday 14:15 GMT)
Mario Draghi, President of the European Central Bank, is scheduled to speak about central bank independence at the conference for celebrating 20 years of independence by the Bank of England in London. Markets often remain volatile during his speeches.
#20: Bank of England Governor Carney Speaks (09/29/2017 Friday 14:45 GMT)
Mark Carney, Governor of the Bank of England, is scheduled to deliver the closing remarks at the conference in London for celebrating 20 years of independence by the Bank of England. Market volatility can be expected during his speeches.