A big week for interest rate announcements, with the Federal Reserve of the US, Bank of Japan, Swiss National Bank and Bank of England all delivering their respective decisions.
The Reserve Bank of Australia issues minutes from its latest meeting and we have inflation gauges from the UK, Eurozone, Canada and Japan as well as New Zealand GDP and Australian employment numbers.
The beleaguered Fed and its committee are in danger of being described as political hacks rather than the impartial intelligentsia that they are supposed to be. No doubt the FOMC will cut rates at their interest rate meeting on Wednesday. I have my eye on USDCAD. The Bank of Canada kept interest rates on hold at 1.75% in July and employment numbers were highly impressive on September 6th.
Property prices are on fire in Canada and some of the “Hongcouver” diaspora may be looking to return from Hong Kong to Canada, especially if tensions in Hong Kong stay volatile. If the US cuts and Canada doesn’t then the Canadian dollar may strengthen. If US President Trump has his way then US rates would be zero. Perhaps he still has his property developer hat on when he makes these types of Tweet. Bank of Canada Governor Poloz seems to have his head screwed on and brain intact. One of the few central bankers who for now at least is looking at the data.
The market likes Cable (GBPUSD) and as I have alluded to in my blog of the last few weeks, I think the move-up in EURGBP has run out of steam. A deal or no deal on 31st October are the two likely outcomes. And “just getting on with it” I feel is what is driving positive GBP sentiment. Additional delay will be negative for the pound. Boris Johnson for all his bluster, is a man on a mission. Fair play to him. Because he at least looks like a leader. And three years of nonsense hopefully will come to an end. David Cameron’s remorse is rather pitiful. He should have kept out of it. He, like Tony Blair, has gone from being PM to non-entity. The UK voted leave. Boris has stepped up to the plate. Let’s get the Job done and have a cup of tea.
And so to the data. On Wednesday UK CPI is released expected to fall to 1.8% Y/Y for August. Eurozone CPI is expected to hold steady at 1.0% Y/Y for August and Canadian CPI is forecast to read 2.0% Y/Y for August. The FOMC is expected to cut interest rates by 0.25% to keep US rates in a band of 1.75% to 2.0%.
On Thursday New Zealand 2nd quarter GDP is expected at 2.1%. The Bank of Japan will likely leave interest rates unchanged at negative 0.1%. Australian employment is forecast be positive with 20,000 new jobs created and the unemployment rate steady at 5.2%. the Swiss National Bank are likely to keep interest rates on hold at negative 0.75% and the Bank of England is likely to leave interest rates on hold at positive 0.75%. Japanese CPI on Friday morning is forecast to be around 0.5% Y/Y for August.
Gold retraced to finish last week at $1496 oz. With US equites testing record highs gold may remain offered. That is unless there are escalations in the US China trade war or other shocks to the system. For example, office space company, “WeWork” is scheduled to IPO in September. A tepid IPO for “WeWork” may be contagious and pour water on stocks of companies with zero profits and elevated prices.
Last week’s drone attacks on Saudi Arabian oil production are likely to cause significant disruption and may filter through to oil prices.
Last Good luck and good trading! Ben Robson
Ben Robson is the CEO of Spectrex Commodities and author of Currency Kings- How Billionaire Traders Made Their Fortune Trading Forex And How You can Too.