Major events of the upcoming week
The situation on the financial markets has gradually stabilized. Despite the fact that the final results of the presidential elections in the United States have not yet been announced, few doubt that the representative of the Democratic Party, Joe Biden, will win. Investors are only somewhat concerned about the actions of Donald Trump’s headquarters in trying to challenge the election results and filing lawsuits for a recount in a number of key states. This heightens uncertainty and nervousness in the market, which could put pressure on risky assets next week.
But gradually the focus of investors' attention is shifting from political news to the economy. The scale of the second wave of the pandemic in Europe and the US has exceeded the expectations of many experts. The authorities of these countries did not expect such a surge in the incidence and hoped that a vaccine against COVID-19 would appear in November-December. Now, even according to the most encouraging forecasts, a coronavirus vaccine may appear no earlier than February-March 2021. Europe and the United States will face a tough winter. Everyone understands this, therefore both the governments and the Central Banks are preparing to increase stimulus measures that will help soften the blow from the pandemic.
There are not many important macroeconomic reports on the economic calendar next week. Of greatest interest are the data of leading indicators, which allow to quickly assess the impact of the pandemic on economic activity. Therefore, in Europe, the main attention of investors will be focused on the indices of the ZEW Institute for Germany. In the US, apart from political news, investors will be watching the October inflation report. The high volatility of the British currency will be supported by macroeconomic statistics and news on the course of trade negotiations.
Germany – ZEW institute indexes
Back in the summer, Angela Merkel announced that the country's economy would not withstand the second lockdown, but after only a few months, the government was forced to introduce a partial lockdown to contain the second wave of the pandemic. Last week, the anti-record for the number of new infections per day was updated almost daily in the country.
It is obvious that the impact of the second wave of the coronavirus pandemic and the new lockdown on the German economy will be very strong. Experts expect the economy to contract in the 4th quarter. The ZEW Institute indices will help assess the degree of impact of the pandemic on the economy; they are leading indicators reflecting the mood of institutional investors and the current economic conditions in the country. Experts expect a decrease in indicators compared to last month's data, which may put quite strong pressure on the EUR / USD pair. But it should not be ruled out that investors may ignore this data if political news from the United States remains the focus of attention.
New Zealand – Reserve Bank of New Zealand meeting
Investors do not expect big surprises from RBNZ. New Zealand's economy continues to be under pressure from the pandemic and the global financial crisis, but the labor market and economy remains stable. The regulator is most likely to leave the interest rate unchanged, but may announce the expansion of the asset repurchase program and a possible rate cut in the future. In this case, the New Zealand dollar may come under pressure.
UK – large block of statistics from the UK
The UK is publishing a large block of important macroeconomic statistics this week. Labor market data will be released on Tuesday. On Thursday, statistics on the volume of industrial production and production in the manufacturing industry, as well as interim data on GDP for the 3rd quarter, will become known. How strong the impact this data will have on the pound will depend on external factors. If there is news on the market about the course of trade negotiations between the UK and the EU, or again the attention of investors will be focused on the news from the US, macroeconomic reports from the UK will have a restrained effect on trading. If there is a shortage of important news in the market, the pound may react quite sharply to the latest macroeconomic reports.
US – consumer price index data
There will be very little important news on the US economic calendar next week. The main attention of investors will be focused on the news of politics.
The most significant publication of the coming week will be the inflation report for October. As a rule, these data have a rather strong impact on the market, since this is one of the targets for the Fed. But lately, the market reaction to the publication of inflation data has been very restrained, since the regulator is implementing a stimulating monetary policy and inflation data is unlikely to have a strong impact on the Fed's actions. Therefore, we expect a restrained market reaction to the publication of data on the consumer price index.