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FX Week Ahead: China GDP and Communist Party Congress

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The markets open next week with the focus on China as the 19th Communist Party congress takes place this week. The event, where President Xi is expected to speak comes in a week where inflation and quarterly GDP figures are expected to be released.

It will also be a busy week for the British pound which will see the monthly inflation figures and the monthly labor market data. Expectations point to UK’s inflation touching 3% which would definitely put the BoE officials in a dilemma.

Data from the US is relatively moderate with only Fed member speeches lined up over the week. The US housing market data will be coming out later in the week. New Zealand will be reporting on the quarterly CPI while Australia jobs report is expected this week.

Here’s a quick recap into this week’s economic calendar for the currency markets.

Economic and political events from China

The week ahead is quite a busy one from China with both economic and political events lined up. The 19th Party congress in China will start on Wednesday and the event is expected to last for a week. More details are expected earlier in the week and will be accentuated by the speech from President Xi.

For traders, clues about the possible slowdown in China’s growth target could be of main importance although the risks for the coming years are still farfetched.

Earlier today, China’s inflation data showed that consumer prices rose 1.6% on the year matching expectations but slowed from August’s price increase of 1.8%. Producer prices rose 6.9% on an annual basis beating expectations. Producer price index is expected to post a steady gain of 6.3%.

China GDP Growth Rate: 6.9% (Source: Tradingeconomics.com)
China GDP Growth Rate: 6.9% (Source: Tradingeconomics.com)

Policy makers are expecting to keep inflation below 3% for 2017. The PPI also showed an increase in August, rising from 5.5% in July.

Later in the week, on Thursday, the GDP data will be coming out. Economists are expecting China’s GDP to rise 6.8% after posting a GDP growth rate of 6.9% in the second quarter. The data is within the government’s target of 6.5% to 7%. On a quarterly basis, GDP rose 1.7% from Q1 in the previous quarter.

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Fedspeak dominates US markets. Housing data on the tap

The week ahead is relatively quiet as far as the USD is concerned. However, a number of Fed member speeches will continue culminating with the speech by Fed Chair, Janet Yellen late on Friday.

Other members who will be speaking includes Dallas Fed President Kaplan who is an FOMC voting member and is inclined to air dovish views and NY Fed President Dudley who is also an FOMC voting member and is considered a hawk.

This week’s Fed speeches come ahead of the one week blackout period that starts before the next FOMC meeting. However, the October Fed meeting is expected to remain on the sidelines.

On the economic front, data from the US will include building permits which are expected to rise 1.25 million while housing starts are expected to remain relatively stable at 1.18 million.

UK inflation and jobs report could set the tone for the BoE

A busy week in the UK will see the release of the inflation data earlier in the week. According to the economists polled, the UK’s inflation rate is expected to touch 3% in September, accelerating from 2.9% the month before.

Core CPI is expected to remain stable, rising at the pace of 2.7% as it did previously. On Wednesday, the monthly jobs report is expected to show the UK’s unemployment rate holding steady at 4.3% while wages are expected to rise 2.1%, rising at the same pace as the previous month.

Ahead of the jobs data, the BoE governor Mark Carney is also expected to speak which will see some volatility in the British pound depending on how Carney comments on monetary policy.

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