Main events of the upcoming week
The market froze in anticipation of the main event of the fall - the US presidential election. As a warm up before the election there will be meetings of three Central Banks at once and a fairly large block of important macroeconomic statistics from the United States. Obviously, in the next 5 days, market volatility will only grow. The apogee will be Monday, November 3, when the first interim results of the exit polls of the presidential elections will be announced.
Meetings of the Bank of Canada, the Bank of Japan and the ECB will be held on Wednesday and Thursday. Looking ahead, let's say that the overwhelming majority of experts do not expect big surprises from regulators, therefore, macro statistics from the United States and Europe are likely to have a stronger impact on the market, which will help assess the impact of the new wave of the coronavirus pandemic on the economy.
In the United States, data on new home sales, durable goods orders, consumer confidence index of CB, data of the primary estimate of GDP for the 3rd quarter, weekly report on the labor market and the index of unfinished sales in the real estate market will be published in one week. All these events can have a rather strong impact on the dynamics of the dollar and other financial instruments. But when making a trading decision, do not forget about a possible gap on Monday. The market reaction to the outcome of the US presidential election can be very strong.
USA - report on orders for durable goods and consumer confidence index.
Despite bitter political struggles in the United States, investors are still watching macro data very closely. The development prospects of the entire global economy depend on the state of the world's leading economy. Despite the new increase in the incidence of COVID-19, the US economy is showing enviable resilience and continues to recover. Experts predict further growth in the consumer confidence index and orders for durable goods, so the dollar may significantly strengthen its position at the beginning of the trading week, having won back some of the previously lost positions.
But let's not forget that the upcoming presidential elections in the United States will make significant adjustments to trading this week. Therefore, the market response may not be so straightforward.
Canada - Bank of Canada meeting
The situation in the Canadian economy remains difficult. The pandemic continues to hold back the pace of economic recovery, which is why the government and the Bank of Canada continue to implement stimulus measures. But now the Bank of Canada has very limited room for maneuver. In the spring, the regulator cut the interest rate from 1.75% to 0.25%. Obviously, until the end of the year, the regulator will no longer take any action. Most likely, the market reaction to the results of the Bank of Canada meeting will be very restrained.
Japan - Bank of Japan meeting
The head of the Bank of Japan and other representatives of the Central Bank have repeatedly made comments on assessments of the current state of the economy and forecasts for the future. The regulator sees positive signs of economic recovery, but long-term risks remain, so the bank will continue to implement a super-soft monetary policy. At the same time, the Central Bank does not yet see any grounds for lowering the interest rate. The regulator is expected to keep the main parameters of monetary policy unchanged. The market reaction is likely to be subdued. Only statements by the Central Bank about a possible decrease in the interest rate in the future can lead to an increase in volatility.
EU ECB meeting
Like other leading Central Banks, the ECB has a very limited set of monetary policy instruments. The regulator has been pursuing a rather soft monetary policy for a long time to accelerate inflation and economic growth. This strategy has never yielded tangible results. The situation has worsened since the start of a new economic crisis caused by the pandemic. In the context of low interest rates, the most that the ECB could do is to increase the volume of the asset repurchase program. In fact, this is the only active instrument used by the ECB.
In recent weeks, Christine Lagarde has provided several comments. She made it clear to the market that no surprises should be expected from the next meeting. The regulator at the next meeting will not change the main parameters of the monetary policy. Changes can be expected only at the December meeting of the ECB, so the market's reaction to the results of the upcoming meeting is likely to be restrained.