Macroeconomic Outlook and Recap: 28/10/19

Brexit was in the spotlight for financial markets last week with a light macroeconomic data calendar. This week sees Brexit stay to the fore, but with a focus too on three major Central Banks (including the Fed on Wednesday) and a heavy macroeconomic (and corporate earnings) calendar.

A pause in the Brexit process over the past week as the Government lost control of timetable for their new Brexit deal.

The UK Government has tried to break the deadlock by calling for a 12th December general election, with a vote timetabled for today (Monday 28th), but it is unlikely to receive the two-thirds majority needed, with rumour that the vote may even be abandoned.

The EU responded on Friday to extend the Brexit leave date beyond 31st October but have yet to agree on the extension length. Rumour is that the majority of EU Members want to extend until 31st January 2020 (but with flexibility to do a deal before then), but France wants to encourage the UK to push through the new Withdrawal Agreement Bill (Brexit deal) and only want to extend until November 2019.

The Pound sold off against the US Dollar, GBPUSD back from a high just above 1.3000 to below 1.2850 and an EURUSD weakening with broader US Dollar strength. The initial reaction from global share markets after the Brexit pause last Tuesday was negative, but positive reactions to US corporate earnings has seen equity averages push higher, with the UK’s FTSE 100 posting strong advance, helped by the Pound weakness, the S&P 500 is close to its record peak and the German DAX at more than a one-year high.

The US-Sino trade talks are continuing to develop the “Phase 1” trade deal announced earlier in October with some positive-sounding, which has assisted pushing global stock markets higher, whilst Government Bonds (and safe-haven assets), have declined.

The enquiry into the impeachment of US President Trump and the conflict on the Turkey-Syria border have been somewhat side lined this week, but should continue to be monitored, with potential to have far more negative impact on financial markets.

What to Watch

On the geopolitical front, Brexit developments will take centre stage this week, with a possible general election vote Monday, the EU decision on extension and the official Brexit leave data still set at 31st October (Thursday).

Central Bank activity and macroeconomic data see a big week

The Bank of Canada, Bank of Japan and the Federal Reserve in the US make their interest rates decision this week.

On the data front, there is a plethora of global GDP, employment, CPI and PMI data to watch, with the spotlight on Friday’s US Employment report.

Economic data
28th October Japan CPI
29th October US Consumer Confidence
30th October Australian CPI; German Employment and CPI; US GDP and Personal Consumption Expenditure (PCE) QoQ; Bank of Canada interest rate decision and Press Conference; US Fed interest rate decision and Press Conference
31st October Chinese Manufacturing and Non-Manufacturing PMI, Brexit deadline (at the moment); Bank of Japan interest rate decision and Press Conference; Eurozone GDP, Unemployment and CPI, US PCE MoM and YoY
1st November Chinese Caixin Manufacturing PMI; US Employment report, US ISM Manufacturing PMI

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