Market movers for the week ahead - Rabobank

Analysts at Rabobank suggest that expect more focus on FX volatility. GBP is back in the limelight after the comments from the UK’s Fox on Brexit compounded those from BoE Governor Carney on Friday. 

Key Quotes

“Carney suggested that the odds of a no-deal Brexit were uncomfortably high.  Although a decent reading for UK Q4 GDP data on Friday could lend the pound some support, the pound is very vulnerable to political uncertainty.”

“Already this morning German factory orders have recorded a far greater than expected -4.0% m/m drop in June on the back of a slump in foreign demand. The data will heighten fear that the impact of trade wars is spreading and could compound the pressure on EUR/USD.  German industrial production data are scheduled tomorrow and the market is now likely to be anxious about the outcome.  China’s July trade data are due on Wednesday in addition to the July FX reserves number which will provide more colour into the recent activity of the PBoC.”

“On Thursday US PPI inflation is due ahead of the CPI release on Friday. The average earnings component of Friday’s US labour report did little to counter the perception that wage costs are still relatively subdued despite tight labour market conditions.  Similarly this week’s US inflation offerings are expected to show little change from the previous month’s releases.”

“In addition to the UK Q2 GDP release on Friday, Japan will post its estimate for growth last quarter. A far better performance is expected after the disappointing -0.2% q/q contraction registered in Q1.  Strong data could renew the confidence of hawkish BoJ market commentators despite the strengthening of dovish forward guidance by the central bank last week.”

“Also, this week some US sanctions on Iran come back into force. The rial has been under heavy pressure implying capital controls, inflation and significant discomfort for the population.”