US Q3 Growth Solid – Central Banks in Focus this week
Global markets suffered on Friday and ended the week in negative despite a better than expected first print of the Q3 growth from the United States. A drop in consumer sentiment from the Uni of Michigan coupled with news that the FBI will review additional mails from Democratic presidential candidate Hilary Clinton sent risk on the offer. The MSCI World index dropped 0.6% for the week and in the US, the markets were red as well with especially Healthcare (sub-index down 1%) being the heavy stone in the S&P500, down 0.3% on Friday. The weekly close in the S&P500 has proven to be a bearish engulfing pattern, which could indicate further bearishness this week.
In FX markets, the USD index fell for the first day in five after testing the 99-area – highest levels since February 2016 and the chance of a rate hike in December as indicated by the implied futures probabilities, fell slightly to 68%. The Sterling recovered slightly on back of better than expected UK Q3 growth figures, which have made analysts upgrade the UK outlook, but risks are still to the downside and Cable has generally been offered post the flash crash in early in October.
Today, the last trading day of October, European indices have opened in negative on back of weak German Retail Sales for September, falling with the sharpest rate in two years. Q3 GDP figures from the Euro Zone came out as expected at 0.3%/1.6% MoM/YoY. In Q3, this means that the UK with a quarterly growth of 0.5% has outperformed the one of the Euro Zone.
We are in the week ahead of the US Presidential Election, so we generally expect volatility in USD-pairs to fade as we get closer to the election. Today, we could see some movement in the Greenback should the figures at 1330CET surprise the markets. Personal Consumption, Personal Income as well as Core PCE. At the same time, we have Canadian data for the September Producer Prices as well as the Raw Materials Prices, so there is potential for a double-whammy in USDCAD.
Later this afternoon, US Chicago PMI data as well as the Dallas Fed Manufacturing will be out and looking further ahead this week, focus will in the US be on the ISM Manufacturing tomorrow, FOMC interest decision on Wednesday and The October Job Report on Friday.
Asia will see the Chinese Caixin Manufacturing PMI and RBA interest rate decision on Tuesday and the BoJ will release their policy statement on Thursday. Europe will have the main focus on Thursday, where the Bank of England will release interest rates as well as the Services PMI.
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