This week, we might see some volatility straight from the open. A partial US government shutdown was triggered at midnight on Friday as the Senate failed to pass the funding bill. The dysfunctional nature of DC politics could negatively impact markets in the short-term.
In Europe, senior members of Germany’s Social Democrats (SPD) said on Saturday they were confident in initiating coalition talks with Merkel’s conservatives. The condition is more concessions on labour, health and migration policies. The Euro could remain upbeat.
Onto the main data risk this week.
- Both the BOJ and ECB meet. The BOJ is worried about the JPY surging higher after recent optimism on inflation led the market to believe in policy normalization. The ECB faces a similar challenge after the latest Minutes had a hawkish tilt, with ECB members showing concern over the economic implications of a stronger Euro.
- NAFTA talks will commence in Canada on Tuesday and will affect the Loonie no doubt, along with it’s own event risk: CPI and Retail Sales.
- US earnings season continues, but don’t forget advance Q4 US GDP.
- In the UK we will see employment data and preliminary Q4 GDP.
- In NZD we have CPI.
Going into the week I remain bullish on US indices and bearish on Bonds; I see Cad weakness appearing, alongside the more evident USD weakness. I’ll be looking for continued weakness as the week opens, and will match it with GBP & Aud strength if we continue where we left off last week.
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