Macroeconomic Outlook and Recap: 23/09/19

The noteworthy geopolitical event to start last week was the market reaction to the weekend attacks on the Saudi Arabian oil fields. The oil price moved up aggressively by a record degree last Monday, only to correct significantly back to the downside as it emerged that output would not be impacted as drastically as first believed. Nevertheless, Saudi Arabia have indicated that they see Iran as the source of the attack and Iran, in turn, have signalled willingness to respond to any provocation. With Middle East tensions remaining high, this leaves the price of oil susceptible to further moves higher.

The key central bank focus moved from the European Central Bank Meeting in mid-September to last Wednesday’s US Federal Reserve Meeting. The Federal Open Market Committee elected to reduce interest rates by 0.25%, as most economic strategists had anticipated. However, the Fed tone was now for a “wait and see” approach after the “mid-cycle adjustment”. The Fed again communicated that they are watching the data, whilst the “dot plot” chart suggests that there are unlikely to be further rate cuts this year.

The ongoing Brexit narrative continues to dominate the UK, both politically and economically, with all data clouded by Brexit and with the Bank of England still in a “wait and see” position. Soundings from the EC and the UK continue to conflict, with a more encouraging outlook espoused by the EC’s Junker late last week, subsequently rejected by various sources.

The continuing trade war consultations were dented on Friday with Chinese officials cutting short their inspections in the USA.

What to Watch

The coming week, geopolitically the US-Sino trade conflict needs to be watched for further developments, alongside Middle East tensions and as ever the Brexit situation in the UK.

On the Central bank side, the Governors of the Bank of Japan and Reserve Bank of Australia speak Tuesday, with Wednesday bringing the Bank of Japan Meeting Minutes, plus the Reserve Bank of New Zealand decision on interest rates.

On the data front, the standouts for the week are on Monday the global Purchasing Managers Index (PMI) data from Markit (both Manufacturing and Services), then US GDP Thursday.

Economic data
23rd September Purchasing Managers Index (global data)
24th September Kuroda (Bank of Japan) & Lowe (Reserve Bank of Australia) speak
25th September Bank of Japan Meeting Minutes; Reserve Bank of New Zealand interest rate decision
26th September US GDP
27th September US Capital Goods Orders & Personal Consumption Expenditure (PCE)

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