Weekly trading forecast October 29 - November 2

Volatility, risk aversion and liquidity crisis - these are the scariest topic for the financial markets currently. Will the global sell-off in equities continue in the upcoming week? Will major currencies keep weakening versus the greenback and Japanese yen? What is the fate of falling oil prices? These are the main questions for traders and investors nowadays. The week ahead closes October, traditionally the toughest month for U.S. stock indices. The last week of earnings season is also crucial for projections in the corporate sector. Two major central banks hold their meeting and rate decisions - Bank of Japan and Bank of England. In the first case, traders got used to the ultra-soft monetary policy, stimulating the export-oriented economy. However, falling sterling does not support economic outlook in the UK which struggles of the Brexit uncertainty. Anyway, the only thing to guarantee for the price action is volatility.

Monday, October 29.

Retail Sales report starts the trading week in Japan. It’s expected to slow down the growth to 2.1% in September from 2.7% in August. Japanese exporters are not satisfied with USD/JPY declining from yearly high levels, and that report might give the pair a lift, in case if an improvement noticed. Several important reports are also expected from the British economy before the Bank of England’s meeting later this week. Consumer credit, M4 Money supply, Mortgage Approvals and Autumn budget reports will be crucial for the regulator to make the final decision about the level of interest rates. Sterling bulls will be looking for better-than-expected figures in order to find some support for the falling-like-a-rock British pound. EU economic forecasts will be the only one event in the European trading session. But the key event on Monday will happen on the other side of Atlantic as U.S. economy will report PCE Price deflator which is even more important for the Fed than CPI and PPI inflation indices. The growth of the index is forecasted at 0.1% level on a monthly basis which is comparatively modest projection. Any improvement in that benchmark would lift the greenback. Personal Spending (0.4% consensus) is also the report to watch.

Bank of England
Source: The Spectator

Tuesday, October 30.

Asian trading session on Tuesday will be influenced by Japanese Unemployment and Jobs/Application ratio, Australian Housing sector data and the speech of RBA Assistant Governor Bullock. Not much of the volatility to expect on that news, and currency traders will monitor equities in order to understand the market’s risk sentiment. European trading session starts with French Gross Domestic Product in the third quarter which is forecasted to show a robust growth of 0.4% quarter-on-quarter. Data from EU will continue with Spanish CPI and German unemployment rate which is expected to remain unchanged at 5.1% level. Eurozone GDP is going to confirm or deny Draghi’s words about the slowdown: the market consensus is 1,9% versus 2.1% in the second quarter. Any improvement of all those reports might support the single European currency from further slide towards the year-lows. German inflation figures are also crucial for ECB’s monetary policy. The key event in the United States will be the CB Consumer Confidence report. Economists predict a modest slowdown of the index: 136.0 compared to 138.2 previously. However, the index is rather strong for the corporate profits to keep growing and supporting U.S. stock indices. In Canada, BoC Governor Poloz is going to host a press conference about the perspective of the monetary policy for the nearest future. USD/CAD bears desperately need a verbal intervention from officials to protect the Loonie from further decline.

Wednesday, October 31.

Wednesday will start with Japanese Industrial Production report, New Zealand Business confidence and Australian CPI. All three reports will fave influence on AUD/JPY and NZD/JPY currency pairs as traders hope for a rebound in Australian and New Zealand economies, accordingly. One of the main events for emerging markets will also be Chinese Manufacturing Purchase Managers Index in October which is expected to come in almost flat compared to September. However, the largest influence on market volatility, especially for yen pairs, will have the Bank of Japan’s meeting, economic outlook and press conference. All of the events are tentative. Most analysts agree that BoJ has nothing but to keep the ultra-soft monetary policy, supporting local exporters on external markets. German Retail Sales, Spanish, Italian, French and European Consumer Price Indices - those are the main data reports from the European economy on Wednesday. In New York trading session, ADP Non-Farm Employment change report will set the expectations for the upcoming NFP on Friday. Canadian traders will watch closely the Gross Domestic Product and RMPI reports in order to confirm the latest outlook by BoC about the sustainable economy in the country. Crude Oil inventories in the U.S. will have a huge impact on oil prices as traders expect a certain decrease in inventories, and thus, an increase in demand. Otherwise, the price of black gold will keep falling.

Thursday, November 1.

Australian economy continues to report important data with the headliner of the Trade Balance report. AUD/USD price action will be determined also by Chinese Caixin Manufacturing PMI report, as the Australian economy depends on exports in China. The only important data this week from Britain is the Nationwide Harmonized Price Index to be released at 07:00 AM GMT, five hours before BoE will announce its rate decision. Higher volatility in all sterling pairs is expected on Thursday. It will be also important to understand how many MPC members voted for a rate hike, despite the fact that ‘unchanged’ verdict is widely anticipated. Carney’s speech at 12:30 AM GMT is going to be the last point for the British pound whether to recover the previous losses last week or to start a new long-term bearish trend. Initial Jobless claims and ISM Manufacturing PMI in the U.S. - those are the key events on the other side of Atlantic on Thursday.

Friday, November 2.

Australian PPI and Retail Sales will have the final impression for RBA in the light of the upcoming meeting and rate decision next week. Europe will report Manufacturing PMI from several main countries of the region. British Construction PMI is also important, however, the sterling’s price action will be impacted by BoE MPC, most likely. All of those events will be overshadowed by the U.S. Non-Farm Payrolls report at 01:30 PM GMT. The head number is expected to be released at 194K mark. It is also important for the Federal Reserve to monitor the Average Hourly Earnings report as it has a huge influence on spending and thus inflation. A significant growth is expected at the level of 3.1% compared to 2.9% previously. If that confirmed, the greenback would soar. Canadian unemployment will be published at the same time and the only thing to guarantee is the volatility of USD/CAD.
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