Weekly Market Outlook

U.S. mid-term elections and RBNZ meeting

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The week ahead will kick off with some big events lined up primarily in the United States. Heading into this week, the U.S. mid-term elections are due and could bring a significant bout of market volatility. This is later followed up by the FOMC meeting. Although no changes are expected, investors will see this meeting as a preview into the December rate hike decision.

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Elsewhere, the RBA and the RBNZ will be holding their monetary policy meetings. No changes are expected from either of the central banks. However, regarding the RBA, the recent slower pace of inflation could trigger some dovish comments from the central banks.

On the economic front, the UK will be releasing its preliminary GDP report among a host of other economic data over the week.

Here’s a quick recap of the leading economic events due this week.

Busy week for the British pound

The British pound is expected to come under pressure this week with some high ticket items lined up over the week. The economic calendar eventually culminates with the release of the advance GDP report for the three months ending September 2018.

Data over the week will see the release of the services PMI which will later be followed by the manufacturing, construction, and industrial production figures. The third quarter advance GDP report will give investors an insight into how the UK’s economy fared in the third quarter of the year.

However, with Brexit still overshadowing the economic data, impromptu releases on the Brexit details could potentially influence the currency more than the economic data. The UK currently has the weakest GDP growth among the G7 nations.

U.S. Mid-term elections

This week will see the U.S. mid-term elections being held. Investors will be bracing for market volatility. Although it is unclear whether the Republican or the Democratic party will emerge victoriously, the markets are likely to see some uncertainty heading into the event.

Historically, the incumbent President’s party is expected to fare poorly, but given the recent trend in opinion polls, it is unlikely to predict the winner. The result of the mid-term elections in the U.S. will also reflect the voter’s approval of President Trump’s policies, especially on trade.

With the U.S. engaged in an active trade war dispute with China, China has retaliated by imposing tariffs on exports from the United States. This also includes soybeans which are a significant export sector for the U.S.

FOMC meeting expected to be a placeholder

The U.S. Federal Reserve will be holding its monetary policy meeting this week on Wednesday. The markets are hoping to see this event be a place-holder event, with no major decisions being taken. With the Fed already signaling that the next rate hike will come in December, investors will be clued into the Fed’s forward guidance ahead of the December meeting.

Recent economic data from the U.S. has remained positive and signaled that the economy is likely to continue moving ahead into the final quarter of the year at the same pace. Although the GDP for the second quarter came in a tad lower, investors expect to see the Fed hiking interest rates one more time at the December meeting.

As a result, this week’s Fed meeting will see investors scaling their expectations for the next big policy move in December.

RBNZ expected to hold interest rates steady

The Reserve Bank of New Zealand will be holding its monetary policy meeting mid-week on Wednesday. Heading into the event, the RBNZ is expected to maintain its official cash rate unchanged at 1.75%.

This would mark a consistent policy. Ahead of the RBNZ’s meeting, the quarterly inflation expectations data is due to come out. Previously, the inflation expectations stood at 2.0%. The RBNZ meeting is likely to be a non-event with the central bank expected to maintain its consistent view. A press conference will follow the meeting.

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