The key events that drove the markets were the drama in the British parliament and the expectancy that a US-Chinese trade deal will be finalized. The British parliament rejected Prime Minister Theresa May’s Brexit deal. A vast majority of the 432 members (vs. 202) voted against the deal. This is the greatest defeat for the U.K. government in recent times. However, this opened up various options, including forgetting about Brexit altogether. The pound advanced against other major currencies.
On the other hand, hopes for a deal between the U.S. and China continued to support commodity currencies. Meanwhile, in the Euro Area, signs of additional weakness weighed down the common currency. In the U.S., the retail sales data was not released because of the government shutdown, which has started to weigh on the American economy. This has led to a decline in consumer confidence, raising concerns.
In the upcoming week, Brexit will continue to remain in the limelight. The ECB’s interest rate decision and China’s GDP data are also due this week. Here is an outlook on some of the key releases:
#1: China GDP (01/21/2019 Monday 02:00 GMT)
China’s GDP grew 6.5 percent on a year-on-year basis in the third quarter of last year, following the 6.7 percent growth in the prior quarter. However, the reading for the quarter missed analysts’ expectations for a 6.6 percent expansion. The GDP growth for the September quarter was the lowest ever since the March quarter of 2009, during the global financial crisis. China’s economic growth slowed down amid tariff dispute with the United States of America and disturbing off-balance-sheet local government borrowings. Forecast for the fourth quarter of 2018: 6.4 percent
#2: U.K. Average Earnings Index (01/22/2019 Tuesday 09:30)
Total earnings of U.K. workers, including bonuses, rose at an annual rate of 3.3 percent to £528 per week during the three-month period to October last year after the figure for the prior period was revised upward to a gain of 3.1 percent. The reading for the period beat analysts’ estimates for a 3.0 percent increase. The total earnings of workers increased at the fastest rate ever since the three-month period to July 2008. Earnings growth picked up in the private and services sectors. However, it advanced at the same rate in construction and retailing, wholesaling, hotels and restaurants sectors. In the public and manufacturing sectors, earnings growth slowed down.
Excluding bonuses, earnings grew by 3.3 percent to £495 per week, the highest rate since the end of 2008, following the 3.2 percent gain in the prior period. This was in line with analysts’ expectations. In real terms, wages including bonuses grew by 1.1 percent, while earnings excluding bonuses increased 1.0 percent.
Earnings growth forecast for the three-month period to November 2018: 3.3 percent
#3: New Zealand CPI (01/22/2019 Tuesday 21:45 GMT)
In New Zealand, consumer prices rose by 0.9 percent in the third quarter of last year and 1.9 percent annually. Analysts had expected the inflation to increase by 0.7 percent during the quarter and 1.7 percent on a year-on-year basis in the third quarter of 2018. The annual figure is slightly below the Reserve Bank’s ‘midpoint’ target level of 1.o percent to 3.0 percent. The main contributors to the increase in consumer prices were transport, housing and household utilities, rentals for housing, and construction sectors. Food prices also increased.
Forecast for the fourth quarter of last year: Consumer prices are expected to remain steady during the quarter
#4: Japan BoJ Outlook Report (01/23/2019 Wednesday 03:00 GMT)
The Bank of Japan’s Economic Outlook Report published in October noted that the economy is expected to continue its growth at a rate above its potential during fiscal 2018. This growth is against the backdrop of financial conditions that highly accommodative, government spending, and firm growth overseas economies. During the fiscal period 2019- 2020, Japan’s GDP is expected to continue its growth trend supported by external demand. However, the pace of growth is expected to decelerate because of the effects of the scheduled consumption tax hike and a cyclical slowdown in fixed investments by businesses.
#5: Japan BoJ Monetary Policy Statement (01/23/2019 Wednesday 03:00 GMT)
The Bank of Japan releases the Monetary Policy Statement 8 times a year. It is one of the primary tools that the central bank uses for communicating with the investors as regards the monetary policy. It provides the outcome of Monetary Policy Committee members’ decision on asset purchases and a commentary on the economic conditions that impacted their decision. More importantly, it provides an economic outlook projection and offers clues on the direction of interest rate decisions in the future.
#6: Japan BoJ Press Conference (01/23/2019 Wednesday 06:30 GMT)
Scheduled eight times in a year, it is considered to be one of the primary methods by which the Japanese central bank communicates with investors as regards the monetary policy. It provides information about the factors that impacted the most recent decision on setting interest rates. It also provides an overall economic outlook and clues on future monetary policy decisions.
#7: Canada Core Retail Sales (01/23/2019 Wednesday 13:30 GMT)
In Canada, retail trade excluding autos remained steady, the same level as the previous month, in October last year. The reading for the month missed analysts’ expectations for a 0.2 percent growth. In the previous month, retail sales grew by 0.1 percent.
#8: Australia Employment Change and Unemployment Rate (01/24/2019 Thursday 00:30 GMT)
In Australia, employment rose by 37,011 in the month of November last year. On a seasonally adjusted basis, the unemployment rate edged up to the 5.1 percent level during the month from the 6-1/2-year low of a level of 5.0 percent registered in the prior two months. Analysts had expected the unemployment rate to come in at 5.0 percent.
Forecast for December 2018: While the economy is expected to add 18,100 jobs, the unemployment rate will remain steady at the 5.1 percent level
#9: Euro Area ECB Main Refinancing Rate (01/24/2019 Thursday 12:45 GMT)
In the Monetary Policy Committee held in December last year, the European Central Bank decided to leave the benchmark refinancing rate at the current level of 0.0 percent. The central bank also confirmed the discontinuance of its €2.6 trillion bond purchase scheme. However, the cash from maturing bonds will be reinvested for an additional period of time. In addition, the policymakers reiterated that they expect the key interest rates to remain at the record low levels at least up to the summer of this year.
#10: Euro Area ECB Press Conference (01/24/2019 Thursday 13:30 GMT)
The President and Vice President of the European Central Bank will participate in the press conference that will be held 45 minutes after the announcement of the Main Refinancing Rate. The press conference lasts for about an hour and has two parts. The first part is reading a prepared statement. The second part is answering questions by the press. As the questions can lead to unscripted answers, heavy market volatility can be expected.