A busy week saw Brexit delayed to Halloween and the ECB and the Fed remaining cautious. What’s next? The upcoming week features Chinese GDP, US retail sales. and lots of UK data that could have an impact after Brexit was delayed. Here the highlights for the next week.
The EU granted a 6-month extension to Brexit, which is now due on Halloween, October 31st. The UK may still approve the current accord and leave earlier. Basically, Brexit is back to the drawing board. Anything from canceling Brexit, a softer version of an exit, new elections, a second referendum, or a hard Brexit are all on the cards. GBP/USD did not go anywhere fast. In the US, the FOMC meeting minutes reiterated the patient stance on rates, with some opening the door to a rate cut. The ECB left its policy unchanged and Draghi said once again that risks are tilted to the downside. The euro dropped but then recovered. Markets calmed on Friday and the risk-on mood pushes the safe-haven USD and JPY lower.
- UK jobs report Tuesday, 8:30. The UK labor market is still doing quite well, despite Brexit. The unemployment rate stood at 3.9% in January and no change is expected. Wages, which tend to take center stage, are projected to advance from 3.4% to 3.5% in the upcoming report for February. The Claimant Count Change, which disappointed with an increase of 27K, is expected to rise again, this time by 17.3K.
- Chinese GDP: Wednesday, 2:00. The world’s second-largest economy recorded the slowest annual growth in 2018: 6.6%. This may be slow for emerging markets but still shows the might of the Chinese economy. After recording an annualized growth rate of 6.4% in Q4 2018, another slide to 6.3% is projected. Also note industrial output, which is expected to pick up from 5.3% to 5.6% in March. A stronger Chinese economy could send the USD and the JPY lower.
- UK inflation: Wednesday, 8:30. Headline CPI slowed down in the UK, mostly due to falling oil prices. The recent increase in energy prices is projected to push inflation to 2% y/y. Core CPI is also forecast to accelerate to 1.9% from 1.8%.
- Australian jobs report: Thursday, 1:30. Australia had a slower increase in positions in February: only 4.6K. However, the labor market looks robust as the unemployment rate fell below 5% to 4.9%, an encouraging development. Employment is expected to increase by 15.2K in March, but the jobless rate carries expectations for a rise back to 5%.
- Euro-zone PMIs: Thursday, 7:15 for France, 7:30 for Germany, and 8:00 for the whole euro-zone. Markit’s forward-looking indices have been flashing red in recent months, with manufacturing PMIs falling to contraction territory, below 50 points. The most devastating drop was in Germany, with a score of 44.1 points in March. However, the services sector is doing OK. The focus remains on the German Manufacturing PMI which is expected to recover to 45.2 points.
- UK retail sales: Thursday, 8:30. UK consumers surprised economists in February with an increase of 0.4% in purchases. This time, a slide of 0.3% is on the cards. The data are volatile but an ongoing decline may be associated to Brexit.
- US retail sales: Thursday, 12:30. After a downfall in December and a surge in January, retail sales returned to normal moves in February, albeit with drops: 0.2% on the headline and 0.4% in core sales. Both figures are projected to increase now: 0.7% on the headline and 0.7% in core sales.
*All times are GMT
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