- Central bankers rule the week
- US Gross Domestic Product likely to weaken the US Dollar
By David Johnson
According to UK Prime Minister, Theresa May, the Brexit deal is 95% complete. I guess the problem is that the remaining (perhaps the wrong word to use in this context) 5% relates to the irreconcilable problem of border controls between northern and southern Ireland. If Mrs May wasn’t reliant on the Democratic Unionist Party (DUP), she may have some leeway but… well, she is, and she hasn’t, and that’s the impasse. This is a big week for the Prime Minister and her Cabinet and the rest of the UK for that matter. Sterling will reflect the changing sentiment and is, therefore, likely to be pretty volatile.
The calm before the storm?
The EU still has the problem of the Italian budget to contend with… oh and Brexit, let’s not forget that, eh? However, these are the only matters to contend with today, because there is a distinct lack of hard data to consider. The apparent willingness by the EU to make some concessions to the UK in order to get a deal done is shoring the Pound up at the moment and the Euro is holding its own.
Central banks take the limelight later this week
With Monday likely to be quiet after a quiet overnight period – New Zealand has its ‘out of office’ message on for Labour Day. The rest of the week is dominated by central bankers. We will have more central banker speeches than anyone deserves and a decision from the Swedish and Canadian central banks. Amongst the speakers will be Bank of England members and those from the US Federal Reserve, the European Central Bank and others.
US Gross Domestic Product figures could be interesting…
The US Gross Domestic Product (GDP) data will be perhaps the most interesting non-central-bank entry in the diary. A slowdown is forecast and that would add weight to the US President’s concern over the pace of Federal Reserve rate hikes. If the data is worse than expected, a weaker US Dollar will ensue.
Bank of Canada ready to raise rates?
The Bank of Canada is widely tipped to be ready to raise their base rate from 1.5% to 1.75% when they meet on Wednesday. Inflation and retail sales data released last week was a tad weaker than expected, but inflation has been above the bank’s 2.0% target level for eight months in a row and many believe that will be the trigger for the rate hike this week. The Canadian Dollar, which has already benefited from the new trade agreement with the US and rising commodity prices, is likely to strengthen in the lead up to Wednesday and a little more after that, as long as the Bank of Canada sticks to the market-written script.
More to follow, but the calm of Monday is likely to be ripped apart as the week progresses. Have a good one.