The week ahead September 20 to 24th
Financial markets are on tenterhooks waiting for monetary policy clues and election outcomes.
Clues would be most welcome from the US Federal Reserve’s 2-day meeting that finishes on Wednesday. We all want to know when they will start the long-anticipated taper of their asset purchase program.
I am sure they will mention that tapering is coming soon, but details are unlikely to be announced until a later meeting.
The USD is starting the week on a firm footing supported by US yields creeping higher and safe-haven purchases. The outlook for further gains will depend mostly on the FOMC’s enthusiasm to stat tapering, or the lack of it.
Across the Atlantic, The Bank of England also has a monetary policy meeting on Thursday. No one expects any change in interest rates. However, with higher than forecast inflation data and a return to pre-pandemic employment levels, Traders will be thinking that the BOE could signal an earlier tightening of policy than previously expected. Any bullish signals would make the Pound an attractive proposition.
Today, Canadians are going to the polls after PM Justin Trudeau decided to call a snap election 2 years early. The latest opinion polls have Trudeau’s Liberal Party tied with the Conservatives, while the New Democrats are at 20%. PM Trudeau could end up as the leader of a minority Government.
USDCAD has been choppy recently, rocked by oil price volatility and monetary policy changes. This trend looks likely to continue with the added spice of political uncertainty.
On Thursday, flash PMI’s for September will provide us with an update of economic activity across the USA, UK, Eurozone, Japan, and Australia.
Finally, let’s not forget that the German’s are holding an election next Sunday. Mrs Merkel’s 16-year reign comes to an end. She will be a tough act to follow.
Good luck this week.