Last week closed with a muted reaction to NFPs and the speech from Powell. The US payroll report was mixed with the headline jobs number coming in slightly worse than expected, while the average hourly earnings was slightly better. Investor sentiment was boosted by news that US/China will talk in October, as well as the move by the PBOC on Friday to cut the RRR by 50 BPs to all banks provided an added boost to EM assets and currencies.
Over the weekend China’s exports unexpectedly fell 1% and copper imports also fell in August. So there may be a bit less optimism when markets open tonight.
In the week ahead, we will have more volatility on the Pound, but the big event will be the ECB decision.
Themes for the Week Ahead:
- Brexit: The UK political scene remains fluid and uncertain. The markets are trading as usual: no Brexit/delay = pro Pound; hard Brexit/BoJo having his way = negative Pound. It does seem difficult that a Brexit can be avoided…but in politics anything can happen.
- ECB: The market is expecting the ECB to cut the lending rate by 0.1% while also announcing a resumption of their asset purchase programme (APP) and a tiered reserve system. The question becomes: will Draghi exceed (as usual) or will the governing council remain more conservative?
- US/China trade debate: always relevant, but nothing new is to be expected this week.
Data in the Week Ahead:
- UK GDP
- UK Employment
- ECB Decision
- US CPI
- US Retail Sales
One the Radar:
Last week’s closing information was all about risk-on and as such going into the week, Dow & Dax longs look good, as well as Aud & Cad strength vs. Eur and Jpy. GBP will remain headline-driven.
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