Key Points from This Week
FOMC Meeting Minutes
The minutes of the October FOMC meeting were interesting given that the tone of discussions was more dovish than the market was expecting. Policymakers noted that risks to the US economy remain elevated and while most supported the decision to keep rates on hold now, the potential need for further easing was noted should the economy move any further to the downside. Many analysts are still pointing to further US easing in the first half of next year consequently.
US-Sino Trade Deal Expected Soon
Expectations for a trade deal between the US and China increased further this week. Comments from a high-level Chinese official helped bolster sentiment, reassuring investors that a deal is on course. While the “phase one” trade deal has yet to be signed, investors remain hopeful that a deal can be completed ahead of the US’s next tariff deadline of December 15th.
Lagarde Calls For Higher Fiscal Spending
New ECB president Christina Lagarde gave her first comments on monetary policy this week following informal discussions with ECB policymakers. Lagarde said that risks to the Eurozone economy are persistent and that the outlook for trade was uncertain. In her remarks, Lagarde called on a greater level of government spending within the Eurozone to help the ECB achieve its mandate goals.
European & UK PMI Weakness
PMI readings, which have been trending lower this year, continued to disappoint this week. The manufacturing index remained in contractionary territory in both the UK, Germany and the Eurozone over the last month. Ongoing trade uncertainty, as well as latent risks around Brexit, is keeping factory activity subdued, meaning that the risk of further monetary easing elevated.
Key Events Next Week
RBA Governor Lowe Speaks
On Tuesday, the RBA head will give his latest update. Given that the RBA recently noted the likely need for further easing, Lowe’s comments will be watched for any signs as to whether the bank is likely to ease again before the end of the year.
RBNZ Governor Orr Speaks
The RBNZ governor will also be speaking next week and as with the RBA, expectations of further easing mean that these comments could cause some volatility if the market senses that any further easing is coming before the end of the year.
Canadian GDP
The latest Canadian growth data will also be a top priority next week. At its latest meeting, the BOC kept rates on hold though signalled that further easing could be necessary given the global downturn. If domestic growth comes in weaker than expected, this could exert some downside pressure on the Canadian Dollar next week.
Keep An Eye On
US-Sino Trade Headlines
The situation remains particularly fluid. The increase in expectations for an imminent deal which we have seen this week feels somewhat of a risk given that no further developments have been noted within negotiations. The Chinese stalled on a signing a deal earlier in the year, leading Trump to end the talks with a fresh bout of tariffs. With China still adamant that the US removed current tariffs ahead of signing a deal there is still a risk of talks failing once again.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!