With all the attention on the European Central Bank’s (ECB) monetary policy lately, the ECB is not one to miss the party and will be announcing their monetary policy decision on Thursday.
1: China’s Q3 GDP likely to remain steady
The week of 10-14 October had seen some turbulence with regards to Chinese data. The weaker-than-expected September trade data, followed by the first rise in Producer Price Index (PPI) since 2012, took the stock market for a roller-coaster ride.
While the trade data depressed markets, the significant step up in PPI lifted sentiment ahead of China’s Q3 GDP release. The market interpreted the data as an indication of China’s economic strength and that helped to correct some of the USD/CNY strengthening lately.
No change has been expected for China’s Q3 GDP which was held steady at 6.7% YoY for the first two quarters of the year. The market generally seemed agreeable with each other with only 9 out of 41 forecasters suggesting otherwise based on Bloomberg’s poll. Alongside the Q3 GDP data release comes September’s retail sales and industrial production, each holding their own weight in influencing markets. A slight improvement has been expected for both and should provide more interesting insights besides the headline GDP figure.
2: Final US Presidential debate
Meanwhile September’s Fed FOMC minutes had offered little additional insights despite the anticipation beforehand, capping gains in the recent dollar rally. Nevertheless, the USD index looks set to close with gains in the week and the S&P 500 index in losses. Besides the handful of Fed speakers lined for the upcoming week, the third and final US Presidential debate will take place on Wednesday.
In the two Presidential debate thus far, Democratic nominee Hillary Clinton appears to have taken the lead and the market had also voted so by bringing the dollar broadly higher. Wednesday’s (Asia’s Thursday hours) debate will be the final chance for candidates to seal an impression in debate form before the elections on 8 November.
The impact on the markets have gradually diminished with each round and the final one is unlikely to be a surprise, particularly given the current news surrounding the candidates. What may be more relevant for markets could be the slew of US data releases including US September consumer prices and housing starts.
3: ECB monetary policy decision
The ECB will gather for their October monetary policy meeting on Thursday, followed by a press conference. Interest rates are expected to remain unchanged though the attention will likely be focused on the stimulus programs after earlier tapering talks. The EUR/USD had dwindled at one point to over two month lows of 1.0985 and is still near its lows as we pen this.
Word has it that the ECB may discuss technical changes to its asset-buying scheme though any decision may be held back until their December meeting. Having had an early taste of the “taper tantrum”, the ECB is likely to remain cautious so as not to further pressure the markets.