MORNING ROLL CALL

Mar 13 • Morning Roll Call • 1497 Views • Comments Off on MORNING ROLL CALL

The ‘inevitable’ Fed interest rate rise, the Dutch election and the UK’s Article 50 Brexit timeline, all look set to dominate the economic calendar events this weekbetween-the-lines1

This week we potentially have an example of how political events can impact our FX markets far more than the scheduled economic calendar events we tend to set our watches by. The rise of what’s being termed “populism” (right wing ideology by any other name) looks set to dominate the Dutch election result this week. Whilst the UK’s Brexit issue will take another turn, as prime minister May can actually (and finally), invoke what’s being euphemistically labelled as “Article 50”, in order to formally begin the divorce proceeding from the European Union.

These two unfolding political events will overshadow other European news releases during the week. Whilst over in the USA, according to those who specifically bet on such outcomes, the FOMC meeting appears to be a ‘slam-dunk’ decision for a rate rise.

For FX traders who specialise, or concentrate mainly on trading the major currency peers including: sterling, dollar and the euro, this week could prove to be particularly volatile. Similarly, we may experience volatile movements in USA, European and the U.K. equity markets due to the political issues and as a consequence precious metals’ values could come under scrutiny.

So market makers, market movers, analysts and investors expect the Federal Open Market Committee (FOMC) to announce that they’re raising rates by 0.25% when they meet on Wednesday. This coming after Chair Janet Yellen gave enough forward guidance recently, by stating that a rate hike “would likely be appropriate” at the next meeting.

It would appear that all the Fed’s economic ducks are in a row, in order to give the green light to an increase; apparently employment in the USA is nearly at full levels, wage rises are running at over 2%, CPI inflation is creeping up and what’s termed “soft data”; generally classed as sentiment indicators, all look bullish. These are metrics that overshadow: deteriorating balance of trade and balance of payments data, rising imports and shrinking exports. In short, the Fed have enough ammunition to justify raising rates, based on their belief that the USA economy is in such a good place, that it can withstand such a small micro rise of 0.25%.

Focus will then quickly turn to Yellen’s post-meeting press conference, for further clues as to the time frame for any further tightening of monetary policy, if hawkish sentiment from the FOMC is broadcast.

The Netherlands begins Europe’s 2017 government elections on Wednesday. Populist Geert Wilders and his Party for Freedom are ahead in the polls and could win the most seats in the 150 seat Dutch parliament, however, the party cannot be expected to form a government with such seat numbers. This election is being observed for any clues that Europe is being subject to and swayed by right wing movements (with immigration as the key debating issue), as recently evidenced by the UK’s Brexit referendum decision and the rise in popularity of Marine Le Pen’s French nationalist FN party.

The UK’s Bank of England is due to reveal its decision regarding monetary policy on Thursday, the analysts polled on the subject expect the UK’s base interest rates to be kept at 0.25% and the asset purchase programme not extended beyond its current £435bn ceiling.

The more dominant UK issue this week, which could dramatically effect the value of sterling versus its major peers, concerns the government potentially triggering Article 50 this week. Royal Assent is not expected before March 13th, theoretically May’s government could trigger anytime this week or, with a sense of irony and bitterness, wait for the 60th European Union anniversary due at the end of the month.

Economic Calendar (all times are London GMT times)

Sunday, 12 March
US/Canada – Daylight Saving Time shift
23:50 – Japan core machinery orders, PPI inflation

Monday, 13 March
04:30 – Japan tertiary industry activity
09:00 – Italian industrial production
14:00 – US labour market conditions index

Tuesday, 14 March
00:30 – Australia NAB business confidence
02:00 – China industrial production, fixed asset investment, retail sales
07:00 – German final CPI inflation
10:00 – German ZEW economic sentiment
12:30 – US PPI inflation
21:45 – New Zealand current account

Wednesday, 15 March
07:45 – French final CPI inflation
08:15 – Swiss PPI inflation
09:30 – UK average earnings, unemployment rate
12:30 – US CPI inflation, retail sales, Empire State Manufacturing index
14:30 – US crude oil inventories
18:00 – FOMC statement, federal funds rate, economic projections, press conference
21:45 – New Zealand GDP

Thursday, 16 March
Tentative – Bank of Japan monetary policy statement
00:30 – Australia unemployment rate
08:30 – Swiss National Bank Libor Rate, monetary policy assessment
10:00 – Eurozone final CPI inflation
12:00 – Bank of England monetary policy summary, official Bank Rate
12:30 – US building permits, Philly Fed manufacturing index, weekly unemployment claims, housing starts
14:00 – US Jolts jobs openings

Friday, 17 March
10:00 – Eurozone trade balance
12:30 – Canada manufacturing sales
13:15 – Capacity utilisation rate, industrial production
15:00 – Preliminary University of Michigan consumer sentiment

 

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