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GDP Waiting in the Wings

GDP Waiting in the Wings


Following the monetary policy decisions from the Bank of Japan and the Federal Reserve last week, markets are now cueing up for the final readings of second quarter GDP from both the United States and the United Kingdom alongside inflation data from the Euro Area and Japan.

Last Week


Announcements from two of the most important central banks of advanced economies dominated the news flow of the prior week, kicked off by the decision by the Bank of Japan to leave interest rates on hold at -0.10%.  Although they released the Comprehensive Review which indicated the bank’s changing stance towards the expansion of the monetary base, the latest decision gave the BoJ more flexibility to change the structure of asset purchases while targeting yields in government bonds to spur inflation.  The decision as largely met with disappointment, sending the USDJPY pair just shy of the key 100.00 level before rebounding to near 101.00.  The BoJ decision was followed by the US Federal Reserve which opted to leave monetary policy unchanged.  However, the latest decision was marked by one of the highest levels of dissent in a year, with 3 out of 10 members voting for a rate hike.  Speculation is now high that the Central Bank will raise rates by a quarter point during the December meeting as the November meeting comes too close to elections.  The US dollar weakened after the decision, sending gold as high as $1344.45 per troy ounce before retreating modestly to end the week.

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The Week Ahead


Attention of financial markets is now fixated on the upcoming oil conference in Algeria which will be complemented by GDP and inflation data from major advanced economies.  With OPEC and non-OPEC members including Russia set to meet on the sidelines of the industry conference being held in Algeria between September 26th and the 28th, volatility remains high in oil futures.  Saudi Arabia and Iran remain the main sticking points to reaching any lasting deal to cap output and freeze production to help stabilize prices.  There will be a significant amount of rumors that may add to volatility in futures throughout the week, however, the probability of a deal remains low, meaning that oil prices could be headed further to the downside throughout the week.  Aside from energy markets, both the United States and United Kingdom will be reporting final second quarter GDP figures.  Current estimates are anticipating a revised US figure from 1.10% to 1.20% while corresponding UK figures are expected to hold fast at 0.60% on a quarterly basis.  Additional data will come in the form of monthly and annualized headline inflation data from both Japan and the Euro Area.  With Japan expected to stay mired in deflation, Europe is expected to see an improvement by comparison, with headline annualized CPI rising to 0.40% from 0.20% prior according to forecasts.

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