We are now one month away from higher tariffs on the Chinese imports to the US and two months away from the Hard Brexit. In such circumstances investors’ attention will be primarily on geopolitics. In the background we will have a series of the macroeconomic data from the US as departments release delayed reports.
Readings scheduled for Monday:
9:30 am GMT - UK, Construction PMI for January. Expected: 52.5 pts, previous: 52.8 pts
1:30 pm GMT - US, Durable goods orders for November. Expected: 0.8% MoM, previous: -4.3% MoM
What to watch for the remainder of the week?
Bank of England decision (Thursday, 12pm BST) and the Brexit drama
If not for the Brexit, the Bank of England could be considering interest rate increase on any given meeting as economic situation in the UK is better than in the EU on average and even more importantly wage growth has picked up. However, the GBP is all about the Brexit drama these days as we are left in the fog with less than 2 months to the no-deal chaotic exit. It looks like Theresa May might be playing a “chicken game” with European politicians in a hope for major concessions on the Irish border backstop. Things could get really ugly if they don’t budge. Affected markets: GBPUSD, UK100.
Trump-Xi meeting details
The second round of trade talks between US and China offered few details and while president Trump was upbeat he also said higher tariffs would become a reality next month unless there is a deal. He also said he wanted to meet with president Xi to finalize such agreement so details of such meeting will obviously be followed closely. Given the state of the Chinese manufacturing where the PMI slumped to nearly a 3-year low Trump may feel he now has a leverage in these talks. Affected markets: AUDUSD, US30.
Macroeconomic data from the US: ISM services (Tuesday), GDP, retail sales
“BEA continues working to set new dates for other delayed releases” - welcome to the post-shutdown reality in the US statistics. The departments that were shut for more than a month need to publish delayed reports with the Q4 GDP the most awaited one. It should see the daylight this week but it is yet to be detailed on what day. Some other key releases like retail sales, home sales or durable orders could be published this week but could very well be delayed until the next week. The US administration better hurry to make it on time before another shutdown that could begin in the mid-February. Affected markets: US500, EURUSD.
GBPUSD is pulling back after failing to break above the resistance zone ranging 1.3215-1.3285. BoE decision as well as Brexit headlines may are among factors that may spur additional volatility on the pair this week. Source: xStation5