U.K. and Canadian Data to Dominate Market Sentiment
Data is light in today’s trading, as there are no major economic releases scheduled in any of the trading sessions. For the Asian market, UK Rightmove HPI is up for printing and it might show another pickup in house prices for the month of October. A positive reading could keep pound pairs supported as it would affirm that the housing sector is doing well in the UK.
Also lined up in the Asian trading session is a speech by RBA Assistant Governor Kent, who is set to give a testimony in Adelaide. No surprises are expected from this event, although any biases on monetary policy could lead to some moves by the Australian dollar.
Medium-tier data is lined up for the London trading session, which might see a bit of volatility among euro pairs. Due from Germany is its PPI or producer price index, which is considered a leading inflation indicator. Bear in mind that deflation has been a concern in the euro region and that its largest economy recently printed a 0.1% downtick in producer prices. Another decline could keep the euro weak, as it might remind traders that price pressures are subdued.
Due from the euro zone is its current account balance, which could post another surplus for the month of August. The surplus has been widening in the past couple of months and might be able to sustain its positive run, otherwise a euro selloff might take place. Quarterly Spanish HPI is also lined up, with a potential pickup in house prices to be seen.
Another factor that could drive euro price action in today’s London session is the release of the German central bank’s monthly report, which would contain its economic assessment and outlook. A downbeat assessment would confirm that the European Central Bank needs to ramp up its easing efforts in an attempt to prevent the region from falling into a technical recession.
Bear in mind though that the IMF recently downgraded its growth forecasts for the global economy, citing the increased likelihood of a euro zone recession. This could further weigh on demand and hurt growth among other major economies.
In the US session, only the Canadian wholesale sales report is scheduled and it has previously shown a 0.3% decline. A rebound might lead to support for the Loonie, although underlying sales data appear to be hinting at another downside surprise. If so, the Canadian dollar could continue to weaken to its counterparts.
Before the US trading session comes to a close, New Zealand will be printing its visitor arrivals data for September. Bear in mind that the economy relies heavily on its tourism industry, which is a major contributor to overall economic growth. Unfortunately for the country, visitor arrivals dropped by 3.0% in August and may be in for another weak run.
Apart from these data releases, risk sentiment could continue to drive market movements, as concerns about the Ebola outbreak dominate the headlines and keep risk appetite in check. Any signs of progress in terms of keeping this epidemic contained could lead to a rebound in risk appetite but reports of more contagion could lead to safe-haven flows.
US equities could also take their cue from market risk appetite, which has been mostly responsible for the steep declines seen in the previous weeks. A pick-up in risk taking could lead to losses for the lower-yielding US dollar and the Japanese yen while continued risk aversion could drag the higher-yielding currencies, such as the commodity currencies and European currencies, much lower.