Macroeconomic/ geopolitical developments
- A solid start to last week for risk assets as European and Asian stocks staged rebounds with US markets closed for the Labour Day Holiday
- However, riskier assets turned south again Tuesday and traded heavy for much of last week (see the “Global financial market developments” section below for details.
- At the start of the week, UK Prime Minister Boris Johnson placed a 15th October deadline for progress to be made on the EU-UK trade talks or risk abandoning talks for a no deal.
- In addition, the government introduced the internal market bill, which will be debated from the start of this coming week in the UK parliament.
- The internal market bill is contentious as it contains provisions that do not comply with the Northern Ireland protocol, which is part of the withdrawal agreement from the EU.
- The confusion and combative nature of this bill has created friction on an international level, as it arguably breaks international law, whilst also creating conflict and division within the ruling Conservative party.
- In the first week of September and in last week’s Macro Watch we highlighted that various European Central Bank (ECB) members including chief economist Philip Lane “jawboned” the Euro lower, after EURUSD hit 1.2000.
- On Thursday last week the attention turned to the ECB interest rate decision, statement and press conference, where all attention was on the Euro and EURUSD exchange rate.
- The monetary policy aspect of the meeting was a damp squib, but ECB President Christine LaGarde said that although the ECB is watching the exchange rate, she also stated “we do not target the exchange rate”. This was a green light for the EURUSD to rally.
- The market attention has started to shift back towards the number of COVID-19 cases, with European and UK new case rates surging, and lockdown measures being reintroduced (although as yet, hospitalisations and deaths are not as aggressively higher).
Global financial market developments
- Global stock markets were extremely erratic last week with tech stocks in the US lurching still lower after the earlier September selloffs.
- However, this must be put in the context of an 88% rally in the Nasdaq 100 since March, with the current correction being 12%.
- European equity indices have marked time (i.e. gone sideways) over the past week, showing a more robust tone than their US counterparts (although Europe did not enjoy the gains seen by the US indices in August).
- The FTSE 100 has been strong the past week, but primarily driven by Pound Sterling weakness.
- Turning to Forex, the Pound has been a significant casualty because of the aforementioned reasons, plunging versus both the US Dollar (GBPUSD down 5% from the September peak) and against the Euro (EURGBP up 5% this month).
- EURUSD has rebounded since ECB President Christine LaGarde’s statement, as above.
- In the commodity space, Oil plunged lower with the US stock market index, whilst the Copper price stays strong.
Key this week
- Monday sees the start of the UK Parliamentary debate on the internal market bill.
- Central Bank Watch: Tuesday bring the Reserve Bank of Australia (RBA) Meeting Minutes; on Wednesday we get the Federal Open Market Committee (FOMC) interest rate decision and statement, with the Bank of Japan (BoJ) and Bank of England (BoE) delivering the same on Thursday.
- Macroeconomic data: Data releases this week are dominated by CPI, Retail Sales and Employment data from the major global economies, detailed below.
|Date||Key Macroeconomic Events|
|14/09/20||UK Parliamentary debate on the internal market bill|
|15/09/20||RBA Meeting Minutes; Chinese Industrial Production and Retail Sales; UK Employment report; German ZEW survey|
|16/09/20||UK inflation data (including CPI); US Retail Sales; Canadian CPI; FOMC interest rate decision and statement|
|17/09/20||Australian Employment report; BoJ and BoE interest rate decisions and statements; US Jobless Claims|
|18/09/20||UK and Canadian Retail Sales; US Michigan Consumer Sentiment Index|