Last week was full of theatre with ex- Trump lawyer Michael Cohen’s testimony, a Trump/ Kim summit in Vietnam which failed to achieve anything significant and a UK parliament motion to avoid a Brexit no-deal after which the British pound rallied, and Goldman Sachs posted a bullish call on sterling. US 4thquarter GDP exceeded expectations at 2.6% Y/Y and Canadian GDP for December disappointed at 1.1% Y/Y. Gold’s recent rally fizzled out as gold dropped below 1300 oz to close the week over 2.5% lower.
This week promises to be action packed, with interest rate announcements from Australia, Canada and the Eurozone; central banker testimony or speeches from Reserve Bank of Australia Governor Philip Lowe, Bank of England Governor Mark Carney, European Central Bank President Mario Draghi and US Fed Chair Jerome Powell. In addition, we have Australian and Japanese GDP numbers, US ISM Services PMI and the all-important US Non-Farm payrolls employment report as well as the US ADP payroll report and the Canadian employment report.
To start with the US: President Trump was abroad and missed the favorable GDP print of last week, and also the predictable negative testimony of his ex-lawyer Michael Cohen who amongst other things labeled his former client a racist, a conman and a cheat. Mr. Trump and his old foe “rocket man” North Korean leader Kim Jong Un met for a two-day mutual back-slapping summit in Vietnam, only for talks on de-nuclearization and lifting of sanctions to break down. With the Mueller Report nearly ready, Trump launched into a scathing attack on Special Counsel Robert Mueller over the weekend in front of an excited Conservative Group in Maryland. Much more exciting for me this week is the prospect of two US employment reports. The ADP Employment change for February is expected to print +190,000 and Friday’s Non- Payrolls is expected to read +185,000 with unemployment falling to 3.9%. Keep an eye out for average hourly earnings which are expected to rise to 3.3% Y/Y for February. ISM services, out on Tuesday is expected to hit 57.3 for the month of February. I think the Fed will be taking a good hard look at these numbers with respect to its interest rate policy and Fed Chair Powell may get some tough questions when he speaks in Stanford, California on Friday evening.
To Canada, and I can’t help feeling that the Canadian dollar may suffer a little this week. Last week’s GDP number was poor! I expect interest rates to stay on hold at 1.75% on Wednesday and employment numbers to disappoint on Friday. Australia releases interest rates on Tuesday which I also expect to remain unchanged at 1.5%. Governor Lowe speaks late on Tuesday evening before Australian 4th quarter GDP is released early on Wednesday morning expected to read 2.7% Y/Y. UK Bank of England Governor Carney will testify to the UK’s House of Lords on Tuesday.
Thursday’s big event is the European Central Bank interest rate decision, with rates expected to remain at 0%. ECB President Mario Draghi will then make a statement in Frankfurt following the decision. Japanese 4th quarter GDP on Friday may impress (exp 1.7% Y/Y) and give some support to the Yen.
Good luck and good trading! Ben Robson