News & Analysis

Week Ahead: Japan’s New Leader, Central Banks Meetings, Brexit and Retail Sales

September 14, 2020

By Deepta Bolaky
 @DeeptaGOMarkets

It will be another busy week with central banks in focus. In a pandemic-induced environment, central banks and governments have absorbed all the shocks of the virus on the financial markets by injecting massive liquidity in the economy, keeping credit flowing and supporting the global economy with huge fiscal stimulus plans to manage an unparalleled health and economic crisis. 

Investors will keep looking for guidance from the central banks and governments.

Equity Markets

Global equities went on a wild ride over the last two weeks after investors got concerned by the sell-off in the technology sector. Mega-cap tech stocks have outperformed during the pandemic and its resilience have recently been challenged. Amid the volatility and uncertainty in the stock market, investors will look for reassurance from central banks.

The Federal Reserve, Bank of Japan and Bank of England will hold their policy meeting this week later this week. As widely expected, the central banks will likely remain on hold with no material changes. 

The Fed will be closely monitored following its recent tweak in language regarding inflation target levels. Amid the political gridlock over the fiscal stimulus package and ahead of the US election, the Fed is unlikely going to put forward policy changes that could alter the election dynamics. Besides the labour market, the US economy is showing signs of improvement which might not warrant any action from the Fed at this stage. 

The Bank of England is also facing a similar fate with Brexit sage fiercely coming back to the forefront. Even though the possibility of negative interest rates have been floating around after the BoE failed to rule it out, no changes are expected at this meeting. 

Japan’s New Leader

Prime Minister Shinzo Abe, Japan’s longest-serving prime minister’s resignation has created a new period of political uncertainty for Japan. The Prime Minister was well-known for his Abenomics which involved a comprehensive policy package to revive the Japanese economy from two decades of deflation while still maintaining fiscal discipline.

Japan’s ruling Liberal Democratic Party (LDP) will hold a leadership vote to elect its new president on Monday. Abe’s replacement may bring volatility in the Japanese Yen and the stock market as markets will analyse the candidate in relation to its capacity in maintaining political relations with countries like the US, China, South and North Korea. 

Brexit Talks

Brexit-related updates will likely continue to dominate headlines. The controversial Internal Market Bill dealing with Northern Ireland is the latest fallout between the European Union and the United Kingdom that threatens to disrupt further negotiations. GBP currency pairs will remain highly volatile to more updates which will unfold during the week.

Key Economic Data to Watch

In the FX space, the performance of the commodity-related currencies has flared better than the US dollar during the recent months. The key economic data releases to watch for commodity FX this week will be:

Tuesday: RBA Minutes and China’s Retail Sales and Industrial Production

Wednesday: Canada’s Inflation Data

Thursday: NZ GDP and Australia’s employment reports. 

Retail Sales in the US and Canada will also gather attention as it is a leading indicator of consumers spending following the easing of lockdown measures.

Commodities

Gold

Last week was another volatile week for Gold. After reaching fresh record highs, the precious metal plunged and slipped the most in seven years last week. Gold reclaimed the $2,000 level as risk sentiment faltered on Tuesday earlier this week but failed to hold on to gains. As of writing, the XAUUSD pair is trading around the $1,933 level.

Virus woes, US stimulus package, and geopolitical tensions are the current factors that could provide support to the haven asset.

Key Events Ahead

Monday

  • Industrial Production (Japan)
  • FDI – Foreign Direct Investment (China)
  • Industrial Production (Eurozone)
  • Inflation Report Hearings and UK Parliamentary Vote on Brexit (UK)

Tuesday

  • REINZ House Price Index, and Westpac Consumer Survey (New Zealand)
  • RBA Meeting Minutes and House Price Index (Australia)
  • NBS Press Conference, Industrial Production and Retail Sales (China)
  • Claimant Count Rate, ILO Unemployment Rate, and Average Earnings (UK)
  • ZEW Survey Economic Sentiment and Labor Cost (Eurozone)
  • ZEW Survey – Current Situation and Economic Sentiment (Germany)
  • Industrial Production (US)
  • GDT Price Index (New Zealand)

Wednesday

  • MerchandiseTrade Balance Total, Imports and Exports (Japan)
  • Westpac Leading Index and HIA New Home Sales (Australia)
  • Consumer & Retail Price Index, and PPI Core Output (UK)
  • Retail Sales (US)
  • BoC Consumer Price Index (Canada)
  • FOMC Economic Projections & Press Conference, Fed Interest Rate Decision and Monetary Policy Statement (US)

Thursday

  • Gross Domestic Product (New Zealand)
  • Full Time Employment, Employment Change and Unemployment Rate (Australia)
  • BoJ Monetary Policy Statement, Interest Rate Decision and Press Conference (Japan)
  • Consumer Price Index (Eurozone)
  • BoE MPC Vote, Asset Purchase, Interest Rate Decision and Minutes (UK)
  • Building Permits, Housing Starts Jobless Claims, and Philadelphia Fed Manufacturing Survey (US)

Friday

  • National Consumer Price Index (Japan)
  • Retail Sales (UK)
  • Producer Price Index (Germany)
  • Retail Sales (Canada)
  • Michigan Consumer Sentiment Index (US)

By Deepta Bolaky
 @DeeptaGOMarkets

Tuesday, 15 September 2020 
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.182 0 0.055 0.074 0 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 4.54 0 0


Disclaimer:  The articles are from GO Markets analysts,  based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own;  should not be taken as either representative of or shared by GO Markets.  Advice (if any),  are of a ‘general’ nature and not based on your personal objectives, financial situation or needs.  You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice.  If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

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