Key Fundamental Factors This Week (10/20-10/24)

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Key Fundamental Factors This Week (10/20-10/24)

Last week, the market moved mainly to poor US data, keeping the greenback in consolidation after a few months of gains. Let’s take a look at this week’s fundamental factors that might shake up the markets.

Tuesday (10/21)
China GDP q/y (Q3)
Forecast: 7.2%
Previous: 7.5%
China GDP q/y 2014

(click to enlarge; source: forexfactory.com)

After peaking in 2010, China’s GDP has been sliding but the pace has flattened since 2013. Q3 data is expected to be the lowest since Q1 of 2009, when it showed a 6.1% growth compared to Q1 of 2008. A softening Chinese economy will likely have downside pressure on risk appetite and commodity prices.

Wednesday (10/22)
AUS CPI q/q (Q3)
Forecast: 0.4%
Previous 0.5%

Bank of England Meeting Minutes are due on Wednesday and should reveal whether members are considering holding off a rate hike. This prospect is pressuring the pound so such tone should confirm and add another leg to the currency’s weakness. It would take pretty strong, hawkish language to convince central bank watchers that the MPC is still planning to raise rates Q1 of 2015.

Bank of Canada is going to decide on monetary policy, and is expected to keep the benchmark interest rate at 1.00%. The bank has been mute about a interest rate hike timeline and has been neutral in terms of economic projections. The CAD has been sliding due to pressure on commodity price as well as unimpressive economic data, so the BoC will need to have some optimistic projections or even a hint of rate hike consideration to give the loonie a boost.

NZ CPI q/q (Q3)
Forecast: 0.5%
Previous: 0.3%
What the kiwi really needs is commodity price inflation as well. It has been sliding and remains pressured, but a slight uptick in inflation can help. The 0.5% expected inflation for Q3 can be annualized to be 2.0%, which is the target rate for the RBNZ.

Thursday (10/23)
German Flash Manufacturing PMI (Oct)
Forecast: 49.6
Previous 49.9 (revised down from 50.3)
nz cpi oct 2014

(click to enlarge; source: forexfactory.com)

The German economy has been shaky and at the brink of recession. The flash manufacturing PMI forecast suggests that the country is essentially in contraction as far as manufacturing is concerned. Unless this index climbs above 50.0, expect further pressure on the Euro.

UK Retail Sales m/m (September)
Forecast: -0.1%
Previous 0.4%

Friday (10/24)
UK Prelim GDP q/q (Q3)
Forecast: 0.7%
Previous 0.9% (revised up from 0.8%)
uk gdp q3 2014
Growth has been consistent since mid-2013. The annual rate was at 3.2% in Q2 2014. while growth continues impress, the BoE will be cautious because the European economies are sliding and that can be a drag on the UK economy. Besides, even if economic growth data impresses, a rate hike is now hinging on wage growth.

US New Home Sales (Sept. annualized)
Forecast: 473K
Previous: 504K

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