Week ahead: return of central banks, political drama and big profits
Without many catalysts for the markets over the past few weeks, potential market movement events will come back in full force this week! After a few weeks in the shadow of the big central banks, the BOC, the BOJ and the ECB meet to discuss monetary policy. In addition, politics are back in the spotlight as the UK releases its fall budget and the US tries to narrow down the final details of Biden’s proposed $ 3.5 billion social spending plan. dollars. And although it is still looming in the background, the coronavirus is once again making headlines. Profits will also be in the foreground this week, as all FAANGs are reporting profit except Netflix, which beat expectations last week. It’s also the end of the month and the markets will have their first glimpse of Q3 GDP. Has the global economy already reached its peak?
The Bank of Canada is the first of the major central banks to kick off this week on Wednesday. With the elections on the sidelines, the economy is once again the center of attention. Higher employment data and higher inflation will likely lead to lower bond purchases. The BOC currently buys C $ 2 billion per week and is expected to cut that amount in half to C $ 1 billion per week.
The Bank of Japan will meet on Thursday, and while no changes are expected, new forecasts will be released. Note that for the first time in a year, Japan’s CPI was positive at 0.2% in September. In addition, base prices, which exclude fresh food, increased 0.1%! Preliminary services PMI was also in expansion territory at 50.7 for the first time since January 2020. Has Japan finally passed the post-pandemic economy? Watch for more data from Japan this week.
Finally, the European Central Bank meets Thursday. No changes are expected, as the ECB told markets it was preparing for changes at the December meeting where new staff forecasts will be presented. However, traders will closely monitor the statement regarding the end of the PEPP in March 2022. Some officials have suggested that the ECB adjust the APP to move away from buying bonds by fixed amounts depending on the size of the country. . Another suggestion was to possibly start a new bond buying program. Watch for clues.
Return to monitoring budgets and expenditures
After the United States ended the debt ceiling and decided not to shut the doors on the U.S. government just yet, the markets took a small break from politics. However, politics are heating up again this week. First, the UK will release its autumn budget on Wednesday. Now that the leave program is over, the government is left with a hefty bill to figure out how to pay. The only question everyone asks is, “Are taxes going to go up?” “. A health and social tax has already been announced. However, the spending is not over in the UK. The government is still helping people recover from the pandemic. Watch to see if the government can close the gap between spending and revenue.
The U.S. spending bill is also making headlines, as Senate Democratic Majority Leader Schumer on Friday set a deadline to reach a deal on Biden’s initially proposed $ 3.5 trillion spending program. dollars for social infrastructure and climate change. The amount appears to be less than $ 2 trillion now, with Biden conceding last week that corporate taxes would not be increased. Once passed, the House of Representatives will vote on the $ 1 trillion infrastructure plan that has already been passed by the Senate.
Parts of Australia have been released from lockdown. Japan’s state of emergency is lifted. International travelers will soon be allowed to re-enter the United States if they are vaccinated. Canada lifts warning for non-essential travel. However, the virus is not yet gone! in other parts of the world, the coronavirus is making a comeback. Russia is setting new daily case records. Russian President Vladimir Putin has issued a stay at home warrant for one week. The UK is experiencing its highest level of one-day cases since March. The Netherlands is also reaching its highest level of one-day cases since July. Why? Some attribute it to a new variant of the Delta variant (that’s a mouthful!). Keep an eye on the number of new cases in countries around the world. On another note, Pfizer-BioNTech said its booster restores 95.6% efficacy in trials. The firm also said Friday that vaccine trials in children showed 90.7% effectiveness.
Large company earnings will be released this week and they have the potential to spread volatility in the markets. All but one FAANGS will report, along with many other tech companies. The results will be important, but even more important will be the advice. Traders will eagerly wait to see if businesses are concerned about supply chain issues and inflation, especially commodity prices and energy prices. Do these companies expect their financial results to be affected in the fourth quarter? It should also be noted that Facebook will organize a special conference on Thursday, during which they should announce a change of name, as well as their entry into the “metaverse”. Here is a list of potential market players releasing profits this week: FB, HSBC, MMM, GOOGL, LLY, AMD, GE, LMT, WTB, MSFT, V, PINS, TXN, TWTR, UPS, AAPL, BMY, BA, KO, F, GSK, SPOT, MCD, GM, EBAY, EAD, LLOY, RDS, BOUTIQUE, AMZN, X, SBUX, CAT, MA, XOM, CVX, AIR, NWG
The end of the month brings the month-end data, including the advanced third quarter GDP. The economist has downgraded his third-quarter forecast for the second half of the summer due to supply chain issues. How much did this contribute to a slowdown from the second quarter? The US will release the Fed’s preferred inflation measure, the PCE core, on Friday. However, Speaking last Friday, Powell practically told markets the Fed will announce a cut at next week’s FOMC meeting. In addition to the BOC, BOJ and ECB meetings this week, other important economic data to release is as follows:
- Germany: Ifo Business Climate (OCT)Tuesday
- United States: S & P / Case-Schiller house prices (August)
- United States: New Home Sales (SEP)
- United States: CB Consumer Confidence (OCT)
- United States: 2-year ticket auction
- New Zealand: Trade Balance (SEP)
- New Zealand: ANZ Business Confidence Final (OCT)
- Australia: inflation rate (Q3)
- Germany: GfK Consumer Confidence (NOV)
- United States: Durable Goods (SEP)
- Canada: BOC decision on interest rates
- United States: 5-year banknote auction
- Stocks of crude
- Japan: Retail sales (SEP)
- Japan: BOJ decision on interest rates
- Japan: Quarterly Outlook Report
- Germany: Unemployment rate (Q3)
- EU: economic sentiment (OCT)
- EU: Final consumer confidence (OCT)
- EU: ECB decision on interest rates
- United States: advanced GDP growth rate (Q3)
- United States: Pending Home Sales (SEP)
- United States: 7-year ticket auction
- New Zealand: ANZ Roy Morgan Consumer Confidence (OCT)
- Japan: Unemployment rate (SEP)
- Japan: Tokyo CPI (OCT)
- Japan: Industrial production (SEP)
- Australia: Retail Sales (SEP)
- Australia: IPP (T3)
- Japan: Housing starts (SEP)
- Japan: Consumer confidence (OCT)
- Germany: Flash of the GDP growth rate (Q3)
- UK: Nationwide Housing Prices (OCT)
- EU: Inflation rate flash (OCT)
- EU: Flash of GDP growth rate (Q3)
- Canada: PPI Final (SEP)
- United States: Personal Income (SEP)
- United States: Personal Expenses (SEP)
- United States: Employment cost index (T3)
- United States: PCE Price Index (SEP)
- United States: Chicago PMI (OCT)
- United States: Michigan Consumer Sentiment Final (OCT)
Chart of the week: Daily Bitcoin (BTC)
Source: Tradingview, Pierre X
Bitcoin is currently up almost 38% for the month of October. On Wednesday, the cryptocurrency hit an all-time high of 67,016.50, knocking out the previous high on April 14.e from 64.895.22. Just below is the horizontal support at 59,603, followed by the 38.2% Fibonacci retracement of the September 21 through October 20 lows.e peaks, nearly 56,642.5. Below is the 50% retracement of that same period at 53,448.50. Resistance hits all-time highs on Wednesday, then the upper ascending trendline going back to October 6e near 70,000. If the price breaks this psychological round number, the next resistance level is at the 127.2% Fibonacci retracement level from April 14th.e peaks on June 22sd lower, at 75,401.
Notice the correlation coefficient at the bottom of the graph at -0.95. This is the correlation between Bitcoin and EUR / AUD. There is a very high inverse correlation between the two assets. Therefore, if BTC moves in one direction, EUR / AUD should move in the opposite direction and vice versa. As we discussed earlier in the month, this could allow fx traders to switch EUR / AUD to Bitcoin if they don’t have access to cryptocurrency trading. However, note that the correlation coefficient shows the relationship in direction, not in amplitude.
Without much fanfare over the past 2 weeks, the headlines will be returning to the markets this week. With the BOC, BOJ and ECB on the agenda, currency pairs are sure to move. Additionally, traders will be keeping a close watch on earnings and economic data, looking for clues as to how the fourth quarter is moving. And don’t forget the coronavirus. Increases in daily new cases are back in some countries, just as the colder months are starting to hit!
Have a good week-end!