AFEX Market Watch Monday September 26th 2016

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Monday Sep 26 • 09:00 EUR German IFO business climate • 09:30 GBP BBA Mortgage approvals • 10:30 CHF SNB Chairman Jordan speaks • 16:05 EUR ECB President Draghi speaks

Tuesday Sep 27

· TBA USD Presidential debate

· TBA GBP UK Minister Fox speech to WTO

· 00:10 CAD BoC Gov Poloz speaks

· 15:00 USD Consumer confidence

Wednesday Sep 28

· 08:00 CHF KOF Economic barometer

· 13:30 USD Core durable goods orders MoM

· 15:30 USD Crude oil inventories

Thursday Sep 29

· TBA GBP Consumer confidence

· 07:35 JPY BoJ Governor Kuroda speaks

· 13:30 USD Final GDP QoQ

· 13:30 USD Unemployment claims

· 21:00 USD Fed Chair Yellen

Friday Sep 30

· 02:45 CNY Caixin Manufacturing PMI

· 09:30 GBP Current account

· 09:30 GBP Final GDP QoQ

· 13:30 CAD GDP MoM

Sterling

Ultimately the main theme for Sterling continues to be Brexit and as such with Boris Johnson suggesting that Article 50 could be triggered Q1 2017 the Pound was again sold last week. For the UK to get a cap on migration it is likely to lose access to the single market, including its right to passport business and as such that means that Lloyds insurance may well move some its operations to Europe and Euro clearing will also move away from London. With London making a large contribution to UK GDP this will slow the UK economy in the medium term. This Tuesday Liam Fox the UK’s international trade secretary will make a speech to the World Trade Organisation (WTO) which some analysts suggest will be in favour of a “hard Brexit” policy, if this is the case it will not encourage sterling buying. On another front the interest rate market is also showing divergence between US and UK interest rates and is another reason for weakness in GBPUSD. Thursday has the release of UK consumer confidence which is expected to show the UK consumer “keeping calm and carrying on” spending. Friday will be important as the market has the release of current account data and final GDP, If the current account deficit has widened then we may well see a retest of the post Brexit low.

Euro

The EURUSD rate is stuck in recent ranges with the single currency gaining or losing ground against other currencies on their respective strength or weakness. As German data has recently been showing a slightly slowing economy the release of German IFO business climate today could be important and ECB President Draghi talks this afternoon.

Dollar

The Fed disappointed yet again last week standing still on interest rates but the focus will now turn to the US Presidential debate. It takes place Monday evening 9 pm EST, lasts for 90 minutes without TV breaks(!) and could be a critical point in the US election. If Trump wins the debate or it is seen as a draw the market will have to start pricing in the possibility of his victory, which according to Capital economics will see 5% knocked off US GDP. If Clinton wins we will get more of what we have seen recently with a refocus back on the Fed for a time.

Commonwealth et al

The BoJ tried to help the banks last week and had little effect on the currency, which they are trying to weaken. They have not been so successful with the currency and of course Japanese exporters still have a need to sell Dollars. On the news that Saudi Arabia are ready to reduce output if Iran agree to freeze production at the current level of 3.6 million barrels per day oil jumped higher only to be sold off after Iran rejected the idea. There is an informal Opec meeting this week in Algeria and early headlines are suggesting that “nothing is off the table” and helping the price firm. Canadian CPI was 0.0% and lower than the expected 0.2% and retail sales disappointed at -0.1% after last month’s 0.0%, with this weak data set the Loonie was sold Friday afternoon.

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