1. UK Consumer Inflation
The latest UK CPI inflation data will be released on Tuesday October 18th at 04.30 EST.
Following the slide in Sterling over the past few weeks, the inflation data will be watched very closely in the short term for evidence on the impact on inflation rates.
If inflation starts to increase rapidly, it will be much more difficult for the Bank of England to cut interest rates further, even allowing for the fact that the bank is prepared to let inflation overshoot the target to some extent. There would also be an important risk that UK gilt yields would rise further if inflation rises sharply.
Sterling weakness will take some time to feed through into the inflation rate, although there are already some pressures in the form of higher fuel prices. There will not have been any impact from the most recent decline in Sterling given that the cut-off for the data was well before the latest currency slide and the data may, therefore, prove to be relatively subdued in this release.
The PPI data will also be important for evidence on inflationary pressures further down the production chain. The latest average earnings data will be released on October 19th and retail sales data on Thursday October 20th.
2. US Consumer Prices
The latest US CPI report will be released on Tuesday October 18th at 08.30 EST.
The most likely outcome is that the Federal Reserve will raise interest rates in December and will look to maintain a very slow pace of tightening.
There is, however, an increasing risk that the bond markets will voice their discontent if there is evidence of a significant increase in inflation. 10-yields are already at four-month highs and the mood surrounding bonds remains much more cautious. The latest inflation data will, therefore, be very important in assessing underlying trends within the economy and the bond-market reaction will be crucial.
Headline consumer prices fell 0.2% in the October 2015 release and there is, therefore, a strong probability that there will be a significant upward move in the headline annual inflation rate for this month.
The core rate will also be important in assessing whether inflation pressures are starting to extend beyond the medical sector.
3. Bank of Canada Interest Rate Decision
The latest Bank of Canada policy decision will be announced on Wednesday October 19th at 10.00 EST.
The Bank Governor will hold a press conference 45 minutes after the release.
This is an important meeting, especially as it contains the monetary policy report and a press conference, which are held every other meeting.
There has been mixed economic data since the previous policy meeting with a strong employment report and gains in housing starts, but weaker than expected readings for inflation and retail sales.
In the previous report, the central bank stated that there was evidence that inflation risks had tilted slightly to the downside.
The comments on inflation trends will inevitably be extremely important within the statement to see if there is any follow-through on downside risks and any explicit move to an easing bias.
Comments on financial stability will also be very important in the report with the bank still very concerned over house-price increases and risks to financial stability from excessive household borrowing.
4. ECB Governing Council Meeting
The ECB will announce its latest policy decision on Thursday October 20th at 07.45 EST. Bank President Draghi will hold his regular press conference 45 minutes later. This will be an important meeting for the ECB, especially as there is only one further meeting in 2016.
There will be an important focus on the bond-purchase programme, which is currently due to come to an end in March 2017, although the ECB has stated that it will be extended if necessary.
Since the previous meeting, there have been reports that the ECB is close to a consensus on the need to taper bond purchases before the programme comes to an end. There have also been reports that the bank could consider a temporary relaxation of rules, allowing some bonds to be bought with yields below the -0.40% deposit rate, and potentially amending the capital key.
If the ECB is considering a further extension of the bond-buying programme, it will be dangerous to delay an announcement beyond December and the bank will need to prepare action at this meeting.
Overall, it will be very difficult for Draghi to repeat his stance of last month and effectively say nothing. If Draghi refuses to make significant comments, market speculation will be rife and Draghi would risk triggering a market assumption that the bond-buying programme will not be extended.
Even if no actual policy changes are agreed, Draghi will have to give some form of guidance.
5. EU Summit
The European Council will meet on Thursday 20th and Friday 21st October in Brussels.
The EU Summit in Brussels will be an important event with the on-going issue of Brexit the dominant focus.
At the meeting in Bratislava last month, the UK was excluded, but UK Prime Minister May will be attending this Summit.
Other EU members, in particular, will not want to engage in any specific negotiations surrounding the terms of Brexit, but the overall tone of the talks will be important for overall market sentiment surrounding the UK economy and Sterling. There will inevitably be expectations of further tough talking with fears over a hard Brexit having a very negative impact on Sterling during the past two weeks.
Any sign of reconciliation and a more measured tone would potentially trigger some rebound in the UK currency given very downbeat expectations.
The latest UK CPI inflation data will be released on Tuesday October 18th at 04.30 EST.
Following the slide in Sterling over the past few weeks, the inflation data will be watched very closely in the short term for evidence on the impact on inflation rates.
If inflation starts to increase rapidly, it will be much more difficult for the Bank of England to cut interest rates further, even allowing for the fact that the bank is prepared to let inflation overshoot the target to some extent. There would also be an important risk that UK gilt yields would rise further if inflation rises sharply.
Sterling weakness will take some time to feed through into the inflation rate, although there are already some pressures in the form of higher fuel prices. There will not have been any impact from the most recent decline in Sterling given that the cut-off for the data was well before the latest currency slide and the data may, therefore, prove to be relatively subdued in this release.
The PPI data will also be important for evidence on inflationary pressures further down the production chain. The latest average earnings data will be released on October 19th and retail sales data on Thursday October 20th.
2. US Consumer Prices
The latest US CPI report will be released on Tuesday October 18th at 08.30 EST.
The most likely outcome is that the Federal Reserve will raise interest rates in December and will look to maintain a very slow pace of tightening.
There is, however, an increasing risk that the bond markets will voice their discontent if there is evidence of a significant increase in inflation. 10-yields are already at four-month highs and the mood surrounding bonds remains much more cautious. The latest inflation data will, therefore, be very important in assessing underlying trends within the economy and the bond-market reaction will be crucial.
Headline consumer prices fell 0.2% in the October 2015 release and there is, therefore, a strong probability that there will be a significant upward move in the headline annual inflation rate for this month.
The core rate will also be important in assessing whether inflation pressures are starting to extend beyond the medical sector.
3. Bank of Canada Interest Rate Decision
The latest Bank of Canada policy decision will be announced on Wednesday October 19th at 10.00 EST.
The Bank Governor will hold a press conference 45 minutes after the release.
This is an important meeting, especially as it contains the monetary policy report and a press conference, which are held every other meeting.
There has been mixed economic data since the previous policy meeting with a strong employment report and gains in housing starts, but weaker than expected readings for inflation and retail sales.
In the previous report, the central bank stated that there was evidence that inflation risks had tilted slightly to the downside.
The comments on inflation trends will inevitably be extremely important within the statement to see if there is any follow-through on downside risks and any explicit move to an easing bias.
Comments on financial stability will also be very important in the report with the bank still very concerned over house-price increases and risks to financial stability from excessive household borrowing.
4. ECB Governing Council Meeting
The ECB will announce its latest policy decision on Thursday October 20th at 07.45 EST. Bank President Draghi will hold his regular press conference 45 minutes later. This will be an important meeting for the ECB, especially as there is only one further meeting in 2016.
There will be an important focus on the bond-purchase programme, which is currently due to come to an end in March 2017, although the ECB has stated that it will be extended if necessary.
Since the previous meeting, there have been reports that the ECB is close to a consensus on the need to taper bond purchases before the programme comes to an end. There have also been reports that the bank could consider a temporary relaxation of rules, allowing some bonds to be bought with yields below the -0.40% deposit rate, and potentially amending the capital key.
If the ECB is considering a further extension of the bond-buying programme, it will be dangerous to delay an announcement beyond December and the bank will need to prepare action at this meeting.
Overall, it will be very difficult for Draghi to repeat his stance of last month and effectively say nothing. If Draghi refuses to make significant comments, market speculation will be rife and Draghi would risk triggering a market assumption that the bond-buying programme will not be extended.
Even if no actual policy changes are agreed, Draghi will have to give some form of guidance.
5. EU Summit
The European Council will meet on Thursday 20th and Friday 21st October in Brussels.
The EU Summit in Brussels will be an important event with the on-going issue of Brexit the dominant focus.
At the meeting in Bratislava last month, the UK was excluded, but UK Prime Minister May will be attending this Summit.
Other EU members, in particular, will not want to engage in any specific negotiations surrounding the terms of Brexit, but the overall tone of the talks will be important for overall market sentiment surrounding the UK economy and Sterling. There will inevitably be expectations of further tough talking with fears over a hard Brexit having a very negative impact on Sterling during the past two weeks.
Any sign of reconciliation and a more measured tone would potentially trigger some rebound in the UK currency given very downbeat expectations.
Only the price on the chart can show the entrance to the deal...
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