Weekly Fundamentals Preview

25 Sep 2017 11:04 AM

After a week full of economic releases and key events, which had a notable impact on the markets. Another week comes with some key economic releases, which likely to keep the volatility on the rise.

Weekend Factors

Over the weekend, two parliamentary elections took place, which had a notable impact on the markets during the first Asian session of this week and outcomes are likely to stay as a minor driver of NZD and EUR this week.

In Germany, Angela Merkel wins her fourth term. However, there were a huge disappointment as the far right party returned to the parliament, which will be a significant challenge for Merkel, leading to a notable drop in EURUSD at the Asian and the European session opening bell

In New Zealand, the incumbent National Party took 46% per cent of the vote, while the Labour party tool 35.8% of the votes, which means that neither won enough seats in parliament to govern alone. This also means that it will take weeks for the country to form a new government, leading to more than 1% drop in NZD across the board.

Japan’s Political Tensions Ahead?

Last week, there were reports that the Japanese PM will announce a snap election. Earlier today, these reports were confirmed. Bloomberg stated that Abe told coalition partner that he will call for a snap election. Moreover, Abe is set to dissolve parliament’s lower house on September 28th.

This announcement comes right after the PM announced 17.8B economic stimulus package. Recently, his popularity has increased, but the question is, is it enough to grant him another term? No one knows.

US Data in Focus Throughout The Week

After the Federal Reserve decision last week, which came in with a clear announcement to start reducing its 4.5 Trillion Balance Sheet, investors will be looking for more evidence whether the Fed will be able to raise rates in December.

On Tuesday, we will be watching the CB Consumer Confidence Index, which set to decline back to 119.6 down from 122.9, while the New Home Sales is expected to rebound back to 591K up from 571K last month. In addition, the Fed Chair Yellen is due to deliver a speech titled “Inflation, Uncertainty, and Monetary Policy” at the National Association for Business Economics Annual Meeting.

On Wednesday, its all about the new orders, as we will be watching Core Durable Goods Orders and the Core Durable Goods data, which set to rebound after last month’s notable decline. Moreover, the Pending Home Sales is expected to decline for the second month in a row. One we have not seen since 2015.

On Thursday, we will be watching the Final GDP, which is expected to be revised higher to 3.1% instead 3.0%, while Friday might be the most important day for the US as we wait for the Core PCE Price Index, Personal Spending, Personal Income, Chicago PMI and the initial reading of the University of Michigan Consumer Confidence Index.

Reserve Bank of New Zealand Decision

During the Asian session on Thursday, eyes will turn toward the Reserve Bank of New Zealand decision, which set to keep the current policy unchanged, including the Official Cash Rate at 1.75%.

After this weekend’s elections, no significant changes is expected by the RBNZ, especially after the notable decline in NZD. Yet, the Bank is likely to try to keep the pressure on NZD, especially after the recent rally. The question remains, will NZD react negatively without a policy action? Probably not as the failed to do so before.

Edited by:

Nour Eldeen Al-Hammoury

Market Analyst

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