Week ahead – Speeches, Retail sales, Unemployment and CPI’s

12 oct. 2020

Earnings season! As we end another quarter, public companies worldwide will start to open up their books to the market, showing us how well (or not well) they did during the Coronavirus. Here’s your week ahead.

Monday, 12th October – ECB President Speech
With the ECB signaling that they are ramping up measures to meet their mandate of 2% by slashing their already negative rates and broadening their lending requirements, Investors and Traders should expect extreme volatility in Euro currency pairs as Christine Lagarde further elaborates on these measures. Currently, Interest rates are at 0%, with real rates being in the negatives. Any more hints confirming a move for interest rates to go lower by Lagarde, and expect the Euro to weaken dramatically.

Monday, 13th and Tuesday, 13th October – Bank of England’s Governor Bailey Speech, and ILO’s Unemployment Rate
The UK was in a position to flatten squash the curve – but they blew it. Fully in their second wave, Prime Minister Boris Johnson has put the country in lockdown too late. Their first wave saw them get around 6,000 new cases per day at its peak. Now they get upwards of 12,000 cases per day. This puts Governor Bailey in a difficult position. He states that “we are by no means out of firepower, not out of luck in terms of policy tools.” However, the second wave may deplete the firepower. However, Governor Bailey is for Boris Johnson and the European Union to agree, stating that he thinks “it is in the interest of both sides – lets be blunt – to get an agreement.”

The UK publisher “The Mail” disclosed that representatives from Britain’s largest lenders have talked to central Bank Officials to prepare for interest rates to plunge below zero. It is stated that Lloyds Bank and NatWest have drawn up plans to invest over 100 Million pounds into upgrading their computer systems to cope with the negative interest rates change. Currently, the UK’s interest rates sit at 0.1%.

On UK’s unemployment rate – 3 months ago, The Guardian posted an article stating, “If a second wave of Covid can be avoided, the UK’s Unemployment Rate is likely to rise to 11.7% by the end of the year…” As we know, the second wave is in full swing meaning unemployment most definitely going to rise further than the 11.7% predicted. Market consensus expects the three month unemployment rate to be 4.3%, slightly higher than the 4.1% print the last time.

Tuesday, 13th October – United States CPI figures
The United States experienced a mostly expected curveball last week, with its President, Donald Trump, contracting the Coronavirus. With election season coming up, Trump has vowed to reopen the United States Economy as fast as possible in hopes for a Hail Mary. However, his reopening may have cost many American lives, as the Coronavirus continues to ravage the economy. With that said, analysts predict CPI to increase slightly to 1.4%, from 1.3% print previously.

Wednesday, 14th and Thursday, 15th October – RBA’s Governor Lowe Speech and Australia’s Employment Change
Australia has done something that the UK has not been able to do – recover from a second wave. The outbreak in Victoria has largely been controlled, although they have continued to stay in lockdown. However, it seems like geopolitical issues have come to hinder their economy. China has reportedly sent out orders to several state-owned steelmakers and power plants to stop coal imports with immediate effect.

Alongside the government’s 98 Billion dollar stimulus plan, the market is pricing in a 75% chance that the Reserve Bank of Australia will cut interest rates from 0.25% to 0.1%. This was from the RBA’s deputy governor Guy Debelle hinting at imminent further easing. See moves in the Australian Dollar if Governor Lowe continues to give hints to crate cuts.

On Thursday, expect a drop of around 50,000 Jobs in Australia. This is a far cry from the 111k positive employment change in the previous print.

Friday, 16th October – US Sales figure and a Presidential Debate…… or not?
On the Commission on Presidential Debates’ recommendation that Trump and Biden debate virtually due to Trump testing positive for the Coronavirus, Trump says no. Now both candidates are scrambling to find venues to reach their voters in the last stretch of the election. The debate on 22nd October, set to be held in Nashville, will likely be the final face-off between the two candidates before election day.

With people in the United States moving freely, it’s a surprise that Retail Sales are predicted to be slightly down this month at 0.5% as suppose to 0.6% the month before. However, this may be due to the employment figures last week being worse than expected.

A busy week ahead as we approach earnings season, and crucial election periods creep up. We have the new iPhone release coming out on Wednesday (Tuesday in America), and banks the likes of Citibank and JP Morgan releasing earnings this week. Stay safe, Trade safe.